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34. Why Most Traders Lose Money and The Solution

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Practice these concepts with a free practice charting and trading account here: http://bit.ly/forex-demo1 For the full lesson with images, text, links, and discussion, go here: http://www.informedtrades.com/5011-solution-why-traders-lose-money.html For our full beginner course in technical analysis and trading, go here: http://www.informedtrades.com/index.php?page=freetradingcourses And of course, don't forget to jump start your learning as a trader by registering as a member of our learning community: http://www.informedtrades.com VIDEO NOTES A lesson on the importance of money management in trading and how most traders of the stock, futures, and forex markets ignore money management because they do not consider it important and therefore loose money trading. Why the Majority of Traders Fail In our last lesson we finished up our series on Candlestick Chart Patterns with a look at the Inverted Hammer and the Shooting Star Candlestick Chart Patterns. In today's lesson we are going to start a new series on money management, the most important concept in trading and the reason why most traders fail. Over the last several years working in financial services I have watched hundreds if not thousands of traders trade, and over and over again I see smart people who have been intelligent enough to accumulate large sums of money in their non trading careers open a trading account and loose huge sums of money making what you would think are easily avoidable mistakes that one would think even the dumbest traders would avoid. Those same traders are the ones that consider themselves too good or smart to make the same mistakes that so many others make, and that will skip over this section to get to what they feel is the "real meat" of trading, strategies for picking entry points. What these traders and so many others fail to realize is that what separates the winners from the losers in trading is not how good someone is at picking their entry points, but how well they factor in what they are going to do after they are in a trade into their trade entries and how well they stick to their trade management plan once they are in the trade. For the few who do get that money management is far and away the most important aspect of trading, the large majority of these people don't understand the large role that psychology plays in money management or consider themselves above having to work on channeling their emotions correctly when trading. So in this series of lessons we are going to first start with a look at the psychology of money management and the role that this plays in causing so many traders to loose their shirts and then move on to ways of managing this before finishing up with specific strategies for managing trades once you are in them. While not the most exciting part of trading, I assure you that if you don't understand and work on the concepts presented in this section you are pretty much doomed to failure as a trader no matter how well you understand the other aspects of trading. Having said this I also assure you that if you do understand and work to expand your knowledge of the concepts presented in this series you will be well on your way to becoming a successful trader.
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Benjamin Foster (3 years ago)
Well, why do most traders lose money and what is the solution??????????????!!!!!!!!
Joey Hotcakes (3 years ago)
useless
Vahe Hovhannisyan (3 years ago)
The thing is - this video tells us what to concentrate on but doesn't tell us how. I would have thought the how is more important, is it not?
Cras gomez (2 years ago)
sticking to a system is so dam hard
Ripper (4 years ago)
Money management has nothing to do with trade management. Money management is all about position sizing...
Boxeo y Debate (5 years ago)
hi,I got a question for you,my wife worked for a company in 1979,,the company still around,,the thing is that she was into an employee stock ownership plan,,how do we know or  find out if she has any money coming to her,and if so, how much,,,thanks
Peter Piper (4 years ago)
+Martillo Duro  It's possible that she could own stock worth something. First of all,you could  contact the finance dept at the new company and give them as much info. as possible. Given them exact names, dates.. Rather than a phone call I'd suggest writing them an old fashioned mail letter. If that doesn't bear fruit, then I'd suggest talking to someone locally who might be able to offer advice.  Is there anyone like that you know personally, maybe in your church or community, a financial advisor, stock broker or maybe an accountant?  As for the stock in the old company, one scenario is that she could have owned 500 shares worth $1 each, which in the meantime have gone up to $5, making her shares worth $2500e.  (a figure merely pulled out of my head, as an example). But It's also possible that the old company was in liquidation when it was sold, in which case the original stock would have no value whatsoever. It's possible that she may merely have had stock 'options' that were never exercised.  She may merely have had the_ right_ to buy 500 shares at $1 but would have had to exercise that option before leaving the company, therefore she doesn't really own any shares. I wouldn't let that discourage you though.  Go from the assumption that she might still have shares in the new company that might be worth something, so I were you I would keep pursuing it.    Please do write again and let us know what you find out.
Boxeo y Debate (4 years ago)
+Peter Piper I tried to find out but it seems as the company was sold,,I could not find any thing else,I dont have either the means or the knowledge to seek farther,,unless some one give ass a hand to really find out,we'll be in the dark about this.,,thanks any ways for your advise.
Peter Piper (4 years ago)
Why don't you contact her old company?  They should have records of the stock.   Btw. she wouldn't have 'money coming to her' but she might have stock in the company which can be sold.
yousef alshaibani (5 years ago)
why people like to talk too much ha???  I`ll give you the bottom line to succeed in trading forex/stocks/whatever you trade.. 1- practice 2- patience And forget all the talking crap
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cybersasho (6 years ago)
I'm watching this after losing more than half of my money..Im not pissed I look at it as an opportunity to learn from my mistake, become a better trader and make my money back..
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leerroy77 (6 years ago)
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Caio Júlio César (6 years ago)
Picking good entry points is important too. You cant't say that one thing is more important than another. Try to use money management with a bad system and you will lose money as well.
rose (7 years ago)
wow this is one of the first area's of trading i went. lol
Jay H (7 years ago)
@2011bilaal If you refuse to take a loss, you will deplete your account on "margin calls" hahaha.
Jay H (7 years ago)
I think exiting is more important than entering. If you get in a trade, you will not want to close without a profit which can cause: Staying in a trade with the optimistic hope it will turn around. Having a winning trade turn into a loosing trade, because you wait to long to exit. Getting in a trade that starts bad and keeps going worse. If you always know when to exit a trade, your loss will be minimized, but going by set loss numbers VS the current activity, IDK that's where it gets tough.
GeorgiaBoi70 (7 years ago)
You have to wonder how a video like this can get 14 "thumbs down." Perhaps it's the exact reason that traders fail. They just don't want to listen to sound, logical advice.
SlowMurder (7 years ago)
he lookslike hell
lorax2013 (7 years ago)
There are old traders and there are bold traders, but there are no old bold traders.
freeSCALPINGindicato (8 years ago)
U will not loosing if U use |RIGHT Forex tool...
srxshadow (8 years ago)
Although this is an intro video to this portion of your series, this theme is by far the MOST important part of being successful at trading and keeping your profits. Novice traders don't just trade against other traders and the markets, they trade against themselves.
A Brooks (8 years ago)
Thanks for sharing what you know. Have watched several of your videos. Great work!!!
MrKompere (8 years ago)
@AdamSlowHandSmith it's called risk taking Doh !
sgrouge (8 years ago)
Im starting my first trades. Trying to have a good strategy, like losing small amounts and winning average amounts. Minimizing risks. Im projecting to adapt my irl, and have more discipline.
What The Heck TV (8 years ago)
the fees are what i worry of and i think its why a lot of people fail,you have to cover the fees to make more money .
msnpassjan2004 (8 years ago)
@smokenfly514 I trade about 6 large cap stocks a year and at $7 per trade Scottrade com has been pretty decent for the last year. Although they sometimes charge 7 and change like 7.15 for some reason. Still a good deal with decent execution.
intelliGENeration (8 years ago)
@InformedTrades you have a higher probability of hitting your target when your target is well within the variance/volatility points... but this strategy needs a lot of margin leverage to make a worth while return.
wallstreet Gatekeepers (8 years ago)
He's correct, I will be advising my group to check for this guy..Wallstreetgatekeepers coming in the future
FreeFOREXautoROBOT (8 years ago)
because they dont use forex auto robots..
Greetings my friend, just wanted to let you know not to trade the forex market, watch my forex video and you'll see it's a scam. I'm trading Oil now, if you haven't tried it you may want to, it's the best thing I personally have ever found, I'm able to trade it everyday and make money, and do so in a very precise way. Sincerely, David
Shawn Johnson (9 years ago)
Hmmm....?
Shawn Johnson (9 years ago)
They just want to help people out that's all. Especially beginners. This is useful information to beginners. I had someone ask me how do you know all about stocks and things like that. You'll be amazed at how many people want to get started but don't what they're doing so they ask a lot of questions. This is good for those people. :)
ichersue (9 years ago)
i agree - back then i was using FAPturbo forex robot on 15 minute charts and as i was watching the candlesticks i was tempted into entering thinking that this was only a demo account so there's nothing for me to lose. at one time i used RSI+stochastic on range-bound markets and MACD+ADX on trending markets, which did well sometimes, except when the price moves sharply, as in my other comment. thankfully it's very easy to create new demo accounts so i'll just keep experimenting with demo accounts
ichersue (9 years ago)
right now i'm only practicing on demo accounts so it's all OK for now. my worst trade (hopefully) was just last thursday. by that time i was feeling better with my analysis and most of the indicators & oscillators i used were pointing downward so i shorted 2 minilots of eur/usd at around 1.4280 (my demo account was @ $160, and i usually trade microlots so 2 minilots was too much) and in a matter of minutes the price went up to 1.4400! i didn't lose half my account, i lost ALL of it.
Barack Obama (9 years ago)
it's because people don't understand day trading is for Pros, and a lot harder then swing trading with a daily chart, you can do it but for noobs its best to stick with daily charts rather then 15 mins.
Barack Obama (9 years ago)
Dave speaks the truth, money management is probably the most important, I am just beginning to learn that and shift my emphasis to MM instead of all out entry!
Barack Obama (9 years ago)
Wow you must be the next John Arnold, so how much risk do you take per trade? what was your worst trade? did you almost lose half your account? heh it's easy to beat the market short term through luck, but the market is a snake it will bite, when it does it's fatal...Careful I have a feeling your taking too many dangerous trades and sooner or later you'll take a devastating lost.
ichersue (9 years ago)
many thanks for these videos sir - it really helps if you have someone explaining technical stuff in simple terms
ichersue (9 years ago)
my very first demo account started with 100 USD and by the end of the week it had grown to almost 400, due in large part to a series of trades where i profited around +20 each thanks to "luck" "guts" or "instinct" (i.e. guesswork) and, feeling overconfident (i was like, "i made $300 in a week on my first demo account, and i'm only 19! yay i'm gonna be a millionaire before i become 20! i'm so great!!! weeee...") i traded larger and riskier positions and... ... opened a new demo account.
InformedTrades (9 years ago)
This is very true. It is much better to take several smaller higher probability trades than try and swing for the fence and take low probability trades. -Brendan
AdamSlowHandSmith (9 years ago)
Heard someone who said that most traders only need to lower their expectations to stay "in the game", instead of swinging for the fence every time at bat. Funny thing is, few realize that you'd be better off making $300 a day consistently than gaining $1k one day, and losing $1k the next while hunting for "the big trade". Counter-intuitive, but the less you focus on winning instead of focusing on becoming a better trader, it seems the better you will do.
sjs2011 (9 years ago)
Your right, alot of people get caught up in the initial success they may have, and all the millions of things they have read and they get greedy. They start thinking wow! soon I will be a millionaire if I keep this up! Many very successful traders begin like this. I did, but then I realised.. Trading will not make you a millionaire overnight!
IRONxMortlock (10 years ago)
looking for friends im bored on cam Oo
InformedTrades (10 years ago)
Hi Trade0714, Thanks for the comment. The psychology of trading is one of my favorite parts about it, such a challenge. Best Regards, Dave
InformedTrades (11 years ago)
I couldn't agree more. Best Regards, Dave
novoster (11 years ago)
Really good things noticed. They must be learned in details before profit appears.

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