Why beginner traders fail? | Forexlive (2024)

The commonsaying is that 90% of traders lose 90% of their money in the first 90 days.That’s not an encouraging statistic for someone who wants to start trading, butthere are some common reasons why most beginner traders fail and knowing themcan help you to avoid the same mistakes and increase your chances of success.

KNOWLEDGE

The firstmistake is to jump into the markets without enough knowledge. That’s likegambling and if you don’t know what you are doing and why, then you won’tsurvive for long. Just look at how many retail traders jumped into the marketsduring the covid pandemic and eventually lost all the gains. There arestories of lucky people changing their lives yeah, but they are very rare, andthe chances are the same as winning the lottery.

EDUCATION

The secondmistake is getting the wrong education from social media influencers whosegoals are just to sell courses and signals. You have to be careful when youinvest in education because “an investment in knowledge pays the best interest”but an investment in the wrong education can be deadly.

CAPITAL

Once youhave some knowledge, you need capital. The rule of thumb is to trade only themoney you can afford to lose. DO NOT trade money you need to pay bills or tolive off of in general. If you do that, you will already set yourself up forfailure because the psychological pressure will be so high that you will easilymake all kind of emotional mistakes, from fearing of missing out to revengetrading.

EXPERIENCE

Even if youget the knowledge, skills and capital, the last thing you need to get isexperience. Real life experience can’t be taught, it’s something you acquirethrough practice and mistakes. It’s the best teacher for anything in life. Yes,you can learn from other people’s mistakes, but nothing can substitute yourown.

In fact,many successful traders study the past experiences to better forecast thefuture. A famous saying by Mark Twain goes like “history doesn’t repeat itself,but it often rhymes” and that happens in the financial markets as well. Thebusiness cycle repeats many times and the market most of the time follows thesame pattern of booms and busts.

UNREALISTIC EXPECTATIONS

The lastmistake is setting unrealistic expectations. Beginner traders think that theycan become rich quickly with trading. Unfortunately, this is a lie that comes from social media influencersand marketers who need to sell a dream to make money.

Just to putthings in perspective, the best traders/investors in history average around 30%yearly returns in the long run. This includes traders like Druckenmiller andSoros who once bet 200% of their fund on one single trade.

On theother hand, we have social media influencers talking about things like 1% perday or 10% per month consistently. You can see the huge discrepancy here. Ingeneral, if you can consistently beat the S&P 500 returns over the long run,then you are good.

FINAL WORDS

You shouldapproach trading/investing as a skill that will help you grow your wealth overtime, not something that will make you a millionaire overnight. It’s not a wayout of poverty or way out of your job.

Fall inlove with the process, learn every day, give yourself time to understand things,don’t rush and enjoy the ride. Trading can teach you a lot of stuff, fromgeography to history, from politics to economics. All of this will make you abetter person both in the markets and in your life.