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Why Do Most People Fail At Retail Trading?

skrimon

Well-known member
A retail trader is a person who trades on their own behalf, not on behalf of a business or other organization. A retail trader is someone who trades with their own money, but not for a living. They buy or sell stocks or bonds for themselves (PA).

A professional trader is someone who works for an institution and gets paid to trade other people's money. Institutional traders buy and sell securities for a group or institution for whose accounts they are in charge.

Institutional traders are often pension funds, mutual fund families, insurance companies, and exchange-traded funds (ETFs). Institutional traders can invest in securities like forwards and swaps that are usually unavailable to retail traders.

Individual traders usually don't trade because of the types of transactions and how complicated they are. By definition, the SEC thinks of retail traders as unsophisticated investors who need some protection and can't make risky, complicated investments.

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There are two main reasons why so many people fail and help each other. First, the media and the trading industry spread the idea that it's easy to make money trading and that anyone can do it.

This is not true, of course. In theory, anyone can do it if willing to put in the work and treat it like a business. Almost no one approaches trading with the same level of seriousness as they would any other job.


Let's ignore the first reason, since we can't do much about it. We're not going to change the fact that a big part of the business depends on people being naive.

Besides the first reason, there is a second reason that has to do with people. Most people who try to trade on the financial markets can't handle their feelings and risks well enough to make it through the learning curve.

Managing your own emotions turns out to be hard, and the fact that the market is always changing makes the learning curve longer. One of the things that makes this business so appealing is also the main thing that makes it so hard to master.

After each trading decision, the direct and sometimes violent feedback you get from the market has a surprising effect on a person's ability to keep his mental health in check and control his own actions.


It could mess up your ability to make decisions and make you feel like you have to fight or run away. This makes you trade based on your feelings or when you're angry, which leads to more losses than any other mistake you could make in this business.

Most other jobs have a buffer zone between the decisions you make every day and how they affect your pay at the end of the month. This line of work doesn't. Every little call you make affects your capital right away.


Every small mistake can cost you money, but every good choice can bring it all back and more. This kind of psychological exposure is very upsetting, and it helps a lot to understand how it works.

So psychology is what sets the pro apart. Don't get me wrong, professional traders still have feelings, but they are much more aware of them and able to control them.


The successful trader knows that trading is mostly about how people see things and that everything else just details.

You might wonder how such a high level can be reached. Start by avoiding any market, financial instrument, time frame, trading technique, or any combination that doesn't fit with who you are.


The best thing is to have as little contact as possible with things that can make your demons come out. Always look for plans that make sense to you and fit who you are.

Always find it funny that most learning materials focus on what the market does, when most of the success in this business comes from knowing how to adapt to whatever the market does. And, of course, the other traders are pretty much the market.
Thanks for reading!
 

Polakandil

Well-known member
Forex market moves dynamic, we can evaluate the mistake as the cause of failure in trading into categories internal mistake and external mistake. Internal mistakes because greed, emotion, abandoning trading rules money management, risk management, etc. While external factors included choosing bad broker with low quality trading service. Speed internet connection, dynamic market etc.
 

Polakandil

Well-known member
i think why most traders fail cause they don't have proper risk management and end up taking too much risk on their trade and blow their account.

Risk management very essential to keep discipline in practice. Each traders has their own capability to control it. Here strong psychology needed to fight bad emotion like as greedy and anger because facing loss trades.
 

WalletInvestor

Well-known member
Lack of knowledge and practice is one of the most frequent reasons why retail traders fail. It's important to find the right resources to learn from and use analysis to help you.
 
Lack of Knowledge is the primary reason for the failure of retail traders. They think that they are fully prepared for the market and then the market surprises them. So, before entering the market it is always advisable for you to analyse the market carefully and come with a workable trading system.
 

FogCrunch

Member
Lack of knowledge and practice is one of the most frequent reasons why retail traders fail. It's important to find the right resources to learn from and use analysis to help you.

True! New traders should make a note of this and avoid these mistakes. Before trading live, know some ins and outs of the market & have a tested trading system.
 

PriceNTime

Active member
Several reasons. We live in an instant gratification age and that simply doesn't exist in trading. It takes time and effort to become proficient enough to even trade with real money let alone make it. The majority of newcomers don't seek education and certainly don't put the practice in. Also people are greedy and many come to trading desperate for money which again means they don't take the time to learn or practice and then also take too much risk and gamble.
 

Racloir

Member
Retail trade failures could be caused by a variety of factors. However, the following are some major reasons for their failures:

1. Inadequate Knowledge
2. Poor Mindset
3. Trading on emotions
4. Inability to conduct market research and so on
 

Apogee

Member
In my opinion, most people fail retail trading because of lack of knowledge. Without the right and specific knowledge, traders will have no plan of executing a trade, they will not know how to technically analyse the charts, they cannot make good risk management decisions, and might also not know how to properly use leverage. This is why knowledge is very important. A trader who is knowledgeable about the market will always have a strategy in place and will have good reasons for buying and selling currency pairs. To ensure they maximise earnings while taking the fewest risks, they would also implement tight risk management guidelines like a stop-loss.
 

Riffraff

Active member
Retail traders' deadliest foes are greed and fear. These illogical desires may be increased further by inadequate trading knowledge and capital. People who have little money to sell often imagine becoming wealthy quickly. Because they cannot afford to lose their money, they wind up taking enormous risks in order to make higher gains, yet the instant a deal even marginally goes wrong, they immediately spiral into fear.
The ideal trading strategy is to never invest more money than you can bear to lose.
 

Wavemeter

Active member
Most of the time, they lack trading experience and in-depth market knowledge. Another factor contributing to their losses is poor execution. You must have good trading skills and knowledge of the subject to be a successful trader.
 

Epedaphic

Member
I think most retail traders are too quick to give up and lack patience in the first place. A beginner should be willing to learn and take it slow until they become skilled enough to risk real money in forex. You will have to deal with challenges but becoming a successful trader is surely possible if you put in the time and effort.
 
Lack of knowledge and practice is one of the most frequent reasons why retail traders fail. It's important to find the right resources to learn from and use analysis to help you.

Right! They take the market lightly. Those who fail have no trading plan or control over their emotions.
 
They fail because they are lacking when it comes to market knowledge and trading skills. The forex market is very volatile and dynamic on its own. And anyone who enters this market with no knowledge is signing up for failures. That is why it is important to prepare well before entering the forex market as a beginner.
 
They fail because they are lacking when it comes to market knowledge and trading skills. The forex market is very volatile and dynamic on its own. And anyone who enters this market with no knowledge is signing up for failures. That is why it is important to prepare well before entering the forex market as a beginner.

Agree! Apart from lack of knowledge and trading skills, many traders neglect the importance of using risk management strategies that lead to unnecessary losses.
 

Comline

Member
Traders ignore knowledge, risk management, and emotional control and end up losing in the forex market. Knowledge is the most crucial of them all because it is the knowledge that makes traders learn about the importance of risk management and emotional control and how to use them. Without risk management, risks cannot be managed. Without emotional control, there will be no control over one's trading.
 

SkyPhoto

Member
People have the misconception that trading is a simple way to make money. But in reality, things are contradictory. However, this is not the only reason for most people's failure. Other reasons for retail trading failure include a lack of proper knowledge, trading on emotions, not learning to predict the market, and many more.
 
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