Why most of The Day Traders Lose?
Day Trading is a highly risky stock trading strategy where investors buy and sell stocks quickly in less than one trading day. Most Day Traders end up flopping. Intraday Trading is rarely lucrative in the long run for even seasoned investors, with an estimated 95 to 97% loss percentage. Would Day Trading be a snake oil then, with minimum to zero probability of lucrativeness over time? Of course no, this is not the case. First and foremost no research document exists that proves this rate is real.Granted, a Day Trader should be aware, he or she is involved in a dangerous game in which most traders will lose, or produce very little profit, in order to pay the profitable investors. What does that mean? This is where supply and demand comes into play. If a professional investor rakes in a large sum of money, potentially tons of small unsuccessful traders lose money or waive off profits to feed the professional traders' profits.
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Novice traders can quickly fall prey to their emotions if their forecast seems to fail, and even very skillful but inexperienced Day Traders often lose substantial amounts, in addition, their profit has to offset fees paid for online brokers and the taxes, as well.
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Reasons why Day Traders lose
» A decline of the stock price is just one place investors can lose money. Unlike in many cases, Day Traders shouldn't ignore transaction fees, commissions and tax burden that can add up after a while. Tax regulations are difficult to understand for a layperson, and most likely lot of Day Traders have never heard of wash-sale rule that can significantly curtail profits.» Scientist conducting surveys, statistics and a broad array of studies for 2 decades have now discovered why the majority of Day Traders lose money, based upon actual broker data analysis.
» Lack of knowledge, emotional influence on buying and selling decision, and poor risk management are common hampering factors in Intraday Trading.
List of some astonishing facts about Day Traders' habits
» Among investors engaged in Day Trading, nearly 40% day trade for only one month.» 80% of Day Traders cease to trade within the first 2 years whereas within 3 years, only 13% stays in the game.
» The average individual investor with mid- to long-term time horizon underperforms a market index by 1.5% per annum while the same date for active Day Traders tends to near 6.5%.
» Though only about 1% of Day Traders are able to benefit from Day Trading, successful Day Traders backed by solid past performance continue to be consistently profitable in the long run.
» Day Traders with positive stock trading track record make up a small proportion (1.6%) of all traders however they are greatly active producing the 12% of all Day Trading activity.
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Irrespectively of investor's time horizon, the difficulty for being profitable has always lied in being steadfastly committed to learning and studying, managing risk factors and danger signals correctly, with no emotions, and sustaining discipline when it comes to adhering to strict trading plans.
Beginner Day Traders often forget, stock trading overall, especially Day Trading is not a kind of entertainment but a profession that assumes a permanently expandable knowledge being developed over time. Day Traders enticed by zeros who expect to be a tycoon within short period of time, are adversely affected by their emotions, namely yearning for making a fortune in an instant.
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Key Takeaways
As disclosed, there are psychological reasons most Day Traders lose but systematic reasons also play a vital role in Day Trader's failure. You can't be on the upside, every time, every day. A professional Day Trader has to come along with loss in which the emphasis is on its amount and frequency. Without implementing even the possibility of trades or days when you lose - through a meticulously developed risk management - you can't put out a well-defined Day Trading strategy supported by mental strength acting as a medley that can cause you win on more trades and more times than you lose.If you don't want to be washed out, be diligent, agile and don't let your self-motivation abate caused either by a winning- or losing circle. Keep your greed and emotions at bay, be consistent, and don't let yourself bamboozled by stock ideas (nowadays referred to as stock tips) and stock catalysts. Be amongst the minority who got accomplished with Day Trading and could create a massive financial welfare.
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