Why do Traders Fail – The Causes

Yes, trading, whether Forex, commodities, stocks, or anything in between, can be very profitable. However, the sad reality is that the majority of people who start trading fail, and quite spectacularly. Traders fail all of the time, and there are way more that fail than those that are successful on a consistent basis.

So, why do traders fail? There are a few big reasons why traders fail, lose money, and often end up throwing in the towel. Today, we want to talk about the mistakes that traders make which lead to failure, and how you can avoid them. Read through everything we have to say here, because it might just save your trading career.

Traders Fail Due to Laziness

Ok, so we realize that starting an article off with what essentially amounts to a personal attack on traders is not exactly flattering. However, the sad truth is that many traders fail due to laziness, plain and simple. The fact here is that many traders out there, particularly the newbies, and even some of the more seasoned veterans too, want others to hold their hands.

In other words, they will ask others questions like “what’s the best indicator?” or “what should I set my stop loss to?”. Now, there is nothing inherently wrong with these questions. However, what it shows is a lack of dedication and commitment.

It’s a clear lack of willingness to put in the hard work and perform their own research. Many people out there don’t actually want to learn how to trade, and most don’t care why they should use this or that indicator, as long as it works.

If you do this, when something doesn’t work, instead of realizing that it may not have worked due to your own laziness, you might say that the strategy or indicator in question is bogus. You might then move onto the next best thing, then when that doesn’t work, you just move on again. It’s a vicious cycle of laziness that causes traders to fail.

Traders Fail Due to Untested & Unvalidated Strategies

Ok, so what you need to know here is what it means to validate a strategy. When a strategy is validated by you personally, it means that you know what all of the components are, and it means that you have tested it repeatedly.

It means that you know how the strategy works, what needs to be done, and you know that it can be very profitable. However, many traders fail because they simply refuse to validate their strategies.

Yes, once again, this also has something to do with laziness. Most traders just want to execute trades and make money, all without having to put in any hard work. If you end up losing money, and you haven’t validated your strategy, you might just come to the conclusion that the strategy doesn’t work, even if it does.

This then leads to you not seeing your own error and the part you played in the losing trade. You need to validate your trading strategy, so that when times get tough, you can be confident in it, instead of just moving onto another strategy that is just as likely to fail.

Failure due to Overwhelming Information

Yet another reason why traders fail as much as they do is because of an overload of information. People, there are literally more than a billion sites out there that try and tell you how to trade. There are so many different charting solutions, indicators, strategies, and get quick rich schemes, not to mention discussion boards and forums, that many get overwhelmed.

Simply put, all of that noise gets in the way, it confuses people, and totally overwhelms traders. At the end of the day, you have so much conflicting information in your head, that you don’t know what to do anymore.

For this reason, when you start trading, you need to keep your end goal in mind, and then work backwards from that goal. Don’t just start researching a bunch of strategies and throw a hail Mary because it won’t work. Filter out the noise, find a rule-based trading system that meets your needs, and focus on what really matters. Overwhelming yourself with information won’t get you anywhere.

Traders Failing Due to Unrealistic Goals & Expectations

Another reason why traders often fail is simply due to setting totally unrealistic goals and having absurd expectations. Sure, you don’t have to work for a mean boss, there is no shady company withholding pay, and you don’t have to deal with annoying office politics either.

Trading from home definitely sounds attractive, but the problem is that many think that it’s a get rich quick scheme. People think that they can start with a few thousand dollars, and make thousands of dollars per month trading.

Folks, chances are that you will end up losing money, especially in the beginning stages. If you have unrealistic expectations, you will end up getting too stressed out, and you will end up breaking the fundamental rules of trading just to try and meet those goals.

People, this is a long term kind of thing, one that requires hard work and dedication. Don’t set unrealistic goals, and even better, try not setting any profit goals at all.

Failure Due to a Lack of Skill & Education

One of the biggest reasons why traders fail is due to a simple lack of education and skill. People, this is not something you can just wake up one day, decide to do, and be successful at it. The most profitable traders out there take courses, they learn from the best, they take seminars, and they spend years honing their skills.

You will never just turn into a professional and profitable trader over night. Once again, this kind of thing takes time, and often lots of it. Simply put, before you really immerse yourself in trading, you need to build up your skills and education.

Why Traders Fail – Final Thoughts

The bottom line is that most traders fail due to a combination of the above reasons that we have discussed. Take a close look at each of the causes of trader failure, and make sure that you are not committing those mistakes. If you have a 9 to 5 day job, and still want to be a trader, check out this article on how to be a profitable trader with a day job.