Thread by @sourabhsiso19

Thread:Why most traders lose money ?

1) @Nithin0dha of @zerodhaonline said that 99% of traders don’t even beat FD returns.

So what is the main reason that most traders don’t make money via trading consistently ?

2) The major reasons most traders don’t make money :

- Following tips
-No strategy
- Letting losses run
- No emotional control

But the major reason which is common in struggling traders is CONTRA THINKING.. Let me explain in detail

3) An avg trader's mind is possessed more with fear than greed. In a downtrend always eager to square shorts at the 1st instance of a fall.

In an uptrend always impatient to exit longs at the slightest resistance.

Always obsessed with supposed CONTRA probability

4) This is the prime reason why most traders have fewer profit making trades & plenty of loss making ones.

No matter how good a trader/analyst, unless this urge to rush into CONTRA at every instance is not curbed, the net result month after month will turn out to be negative.

5) Another problem is, taking a trade in anticipation & it goes against for a while, then comes back in favour.

The trader is fed up with the -ve MTM & exits the trade at cost & looks for a different trade

Good Trades may take time to go in favour. So there is no clear plan !

6) 3 main stages of a trader -

1. Loss making
a) Big losses
b) Small Loss
2. Preserving capital
3. Profit making
a) Small Profits (Sometimes)
b) Small profits (Consistently)
c) Big profits (S)
d) Big profits (C)

You got to transition from 1a to 3d patiently. No shortcuts!

7) There are 3 things common in successful traders

a) They know the risk before taking the trade

b) Focus on selected instruments & strategy

c) Pyramiding when right and exiting quickly when wrong

8) There are 2 important elements to every trade

Direction & Timing

Be wrong on one of the two & the trade is wrong.

Good traders focus on timing ( entering when risk is low & reward is big)

So even if they are wrong on the direction the loss is minimal

9) So how to improve as a Trader ?

Key component in trading success is stock selection & limited focus.

-Select any 1 liquid instrument & analyse it’s historical behaviour in detail & build a rule based strategy around it.
-Stick to your strategy & never miss a trade in it.

10) Know all major levels, how the instrument moves generally and behaviour of that particular stock.

- Generate additional insights and incorporate the feedback & insights back in to your trading strategy.

- This sheer focus will give you the results you have been craving for.

11) I started with

Cash Market
Moved to futures trading
Option Buying but unsuccesful

But eventually settled with non directional option selling & consistent with it & it suits my psychology too

12) I still remember that I started with 4 lots in Banknifty in 2016 and now scaled upto 500 lots slowly & trade fearlessly.

I have losing days as well & sometimes losing month too. But I stick to my strategy & follow it consistently.

I know my strengths & focus on that only

13) Focus on below to improve as a trader :

Make a trading plan & follow it

Have limited focus & stick to 1 or 2 strategy

Control your emotions & improve psychology

Accept losses & learn a lesson from it

Maintain a journal

Be a sniper not a machine gun

End