Why do traders lose money in trading?

[laubeaud]

From my experience, here are 4 reasons I discovered:

1/ Lack of Discipline— a) Not sticking to one strategy, b) not respecting your trading rules, c) not sticking to your plan.

2/ Lack of knowledge—Inadequate understanding of the market, trading strategy, financial instruments, and fundamentals can lead to poor decision-making.

3/ Not having a mechanical trading system—This leads to emotional trading. Decisions driven by emotions like fear and greed rather than rational analysis result in significant losses.

4/ Overtrading—Taking many trades will affect your decision-making ability and lead to poor decisions.

If there are other reasons why traders lose money, share them with me.

[royalfestus]

I don't believe traders can completely avoid losses; it's all about having strategies to minimize them. Human psychology, particularly greed and the desire for more profit, is a significant factor. Controlling these emotions is challenging unless you have strong emotional management around money. Experience benefits everyone in business, regardless of the field

[Oshosondy]

Another one is the use of high leverage. Another is not having good risk management. Budgeting or bankroll of the amount that you can afford to lose is very important. But do not because of that use high leverage.

4/ Overtrading—Taking many trades will affect your decision-making ability and lead to poor decisions.

This has been my problem in trading. I can have in mind that I should just have $10 PnL for the day and stop trading but after I have $10 profit already, I will continue to trade until the day do not favour me.

[Fivestar4everMVP]

It is important we understand that one can not  trade and make profit every single time they trade, losses are still a normal thing in trading, just same way it is in gambling, the only thing I would say is that; as a professional and experienced trader, your won trades should be way way higher than that trades you lost.

And when it comes to why traders lose money, the only and basic answer I have is, it's due to lack of proper knowledge, skill, and experience.
Someone with a well polished trading knowledge, skill and experience, won't lose trades unnecessarily, because they would already know every thing that could make them lose their trade and try as much as possible to avoid doing such or things in that aspect.

[mirakal]

No matter what you do OP, this won't give an excuse for losing, all traders commit mistakes.
You have all the points as to why traders lose their money but even how careful you are, losing is still possible. Therefore, don't assume we can avoid this because of the volatile situation of the market, you can't put everything in our hands and know what will happen next. In fact, even pro-traders still lost which means that there is no perfect trading strategy to be found and it never existed. The only thing we can do is to minimize losses but can't stop it.

If you are really a trader, you know the situation already. Losing is a part of trading but I don't see it in a negative way instead, it helps me think that trading is risky and hard to rely on.

[Davidvictorson]

Fear and greed that makes traders to impulsively enter the market is also responsible for why they lose money. I think that temporary profits prevents them from knowing this first. They because their strategies are not sustainable it like taking a step forward and three steps backwards. Their greed and fear which makes them impulsively enter the market and make profit toady's will also become responsible for their significant losses the next day or two days after.

[~speedx~]

Losing money in trading happens to many people.The main reason is not having enough knowledge about trading.Not being able to analyze the market.Trading without understanding the market situation.Too much leverage and repeated trading.Due to these reasons almost people lose money in trading.

[doomloop]

Their greed and fear which makes them impulsively enter the market and make profit toady's will also become responsible for their significant losses the next day or two days after.

Greed maybe but not fear because when they are fearful, they won't enter the market. Fear is also what prevents us from knowing something because we are afraid to experience that thing but we can't be fearful if we will only read information about them, so it is still possible for us to know something even if we are only like this. It's okay to take one step forward and more steps backward, than only move forward because there might be dangers that you will face and at least, you still try, than not making any steps at all. As long as we are the ones who do such thing, then it indeed that it is also our responsibility whatever happens to us.

I think that temporary profits prevents them from knowing this first.

When we are greedy we want more, so temporary profits doesn't prevent us from knowing it.

[Silberman]

From my experience, here are 4 reasons I discovered:

1/ Lack of Discipline— a) Not sticking to one strategy, b) not respecting your trading rules, c) not sticking to your plan.

2/ Lack of knowledge—Inadequate understanding of the market, trading strategy, financial instruments, and fundamentals can lead to poor decision-making.

3/ Not having a mechanical trading system—This leads to emotional trading. Decisions driven by emotions like fear and greed rather than rational analysis result in significant losses.

4/ Overtrading—Taking many trades will affect your decision-making ability and lead to poor decisions.

If there are other reasons why traders lose money, share them with me.

All of those are without a doubt important reasons why traders lose money, but you probably forgot the most important, and that is because they have to, many people have the unrealistic expectation that they can trade and never lose any money, and this is not possible, at best a trader will earn more money than what they lost, but losing is inevitable, also it is important to remember that by the way the markets work, we are bound to have way more losers than winners, since trading is a zero-sum game.

[Dzwaafu11]

2/ Lack of knowledge—Inadequate understanding of the market, trading strategy, financial instruments, and fundamentals can lead to poor decision-making.

You are right on this. there is no way a trader can be successful trader without the proper knowledge of trading, the knowledge just be as a tool for trading without it trading is impossible.  and not just the knowledge their many things a trader need before can be able to achieve his success in trading.  since we all know that trading is very risk. However, the technical analysis is also important, and then emotions and greed need to be overcome before someone can be a qualify trader.

4/ Overtrading—Taking many trades will affect your decision-making ability and lead to poor decisions.

Although. My own opinion on this will be that if someone really has the knowledge of trading, then overtrading will not be a problem because he knows what to do before he trades. I think overtrading can only affect someone who does not have deep knowledge of trading or is greedy; if not, I don’t think it will be a problem. If someone trades and wishes to trade more, it’s fine with him. The main thing is the knowledge to me. 

[livingfree]

You can add overconfidence on that list.

It's because that many of these traders think that they know how to read the charts and have a good analysis. But then, it's not all about that. And another thing.

You just can't time the market and it's always highly speculative and with that, you'll never get to see a very accurate reading of the market at all times.

I agree with all that you've said and want to point out overtrading. When the profit isn't enough, a trader thinks that he needs to do more until he lose instead of winning.

[Hamza2424]

Over trading ? what is this now, do you mean by taking trades at the wrong time or taking multiple trades in the same time frame, how it can be considered as over-trading.

For the rest, I do agree that people lack in these points when they suffer losses, but you cant be a perfect trader because your loss is your experience and without experience you cant be a good trader.

[Zaguru12]

1/ Lack of Discipline— a) Not sticking to one strategy, b) not respecting your trading rules, c) not sticking to your plan.
If there are other reasons why traders lose money, share them with me.

This particular advices are actually important to a trader but they do not stop one from losing rather we should say they minimize your losses. Traders can follow their own strategy and still be on a long losing streak but the importance of sticking to it is they help you to learn. That’s why one advice I will add is to trade few pairs and not just all pairs, try to have the culture of back testing your strategy on a pair multiple times first before going full in to trade them.

Another one is the use of high leverage. Another is not having good risk management. Budgeting or bankroll of the amount that you can afford to lose is very important. But do not because of that use high leverage.

I don’t actually see using high leverage as a very big problem if at all you have a very good risk management. Even at a 100x leverage if your position size is well calculated you will not get into huge loose because you will have gotten your perfect stop loss.

This has been my problem in trading. I can have in mind that I should just have $10 PnL for the day and stop trading but after I have $10 profit already, I will continue to trade until the day do not favour me.

This is a very serious problem to almost every trader, only the few disciplined traders can overcome this, the Euphoria of been on a winning streak can drive one to over trading. This is part of the reason why some traders even take off take profits and allow trades to move until some reverse back. I think this and revenge trading if overcome by a trader will solve more than half problems associated with trading physiology

Over trading ? what is this now, do you mean by taking trades at the wrong time or taking multiple trades in the same time frame, how it can be considered as over-trading.

Over trading can be when you trade multiple pairs just to gain more profits. Or you trade more than you use to, for example you usually trade two pairs a day but after they hit TP you go back to trade again or when you lose instead of opting out of trading you continue trading to recover losses there by surpassing your usual limits.

Some people can open ten trade positions at same time, this makes you not to study the trade well enough before executing them. This is my own opinion of over trading

[Issa56]

Losing money in trading happens to many people.The main reason is not having enough knowledge about trading.

Trading is all about profit and loss, so as traders, we should always expect losses in our trades, even if we are professionals. Just that, when we are trading, we should always make sure that our profits are greater than our losses. If we are trading and we notice we lose more, then something is definitely wrong, which we are supposed to check. But I will say we can’t avoid losses completely when trading. If you are trying to accumulate knowledge about trading, then you are even going to come across it.

Too much leverage and repeated trading.

When I started trading futures, I wasted a lot of money just because I was using high leverage. When trading futures, we should always maintain low leverage, we shouldn’t be greedy. Most people are always looking for huge amounts of money, so they do end up making use of high leverage, which increases their chances of losing their money.

[Bitwave01]

Despise all the strategy being applied, trading is not 100% guarantee but if proper analysis is being put in place at least your wins will be more than you lost, and you can be said to have made profit.

I have experienced a lot in trading and to an extent I was thinking is been manipulated and people are using people to make money, one of my experience, after learning the basis of trading, I bump myself into a telegram group of over 10,000 subscribers, where signal is being dropped but this is what they do, they look for a project that is in the dip and very low in price, they buy millions of that coin and keep in their wallet after that they will come to the group and tell everybody to buy this coin that the coin will pump in price.
And everybody will start buying, whereby causing a high demand of the coin as well as causing the price to go up and they will sell their own coin and make a whole lot of money then the price will drop back.

[Natalim]

Traders lose money in trading, simply because there are no guarantees that your trades will consistently be favored by the market. The trading market is unpredictable, so that makes the outcomes of your trades uncertain as well. However, as much as there are inevitable losses when trading, but you can always learn to reduce them if you meet the requirements of a good trader. Just don’t trade for greed but trade with knowledge, expertise and discipline, that way we can have bigger chances of winning our trades.

[nelson4lov]

The way the reasons were aligned nicely in OP would make you think that the reason why most traders loose rather than win is that isn't. In hindsight, it's not.  I've recently started reading "Trading in the zone" by Mark Douglas and one of my biggest takeaways is the explanations about why someone of the best technical or price action traders end up with more losers than winners.

~Snipped

I bump myself into a telegram group of over 10,000 subscribers, where signal is being dropped but this is what they do, they look for a project that is in the dip and very low in price, they buy millions of that coin and keep in their wallet after that they will come to the group and tell everybody to buy this coin that the coin will pump in price.
And everybody will start buying, whereby causing a high demand of the coin as well as causing the price to go up and they will sell their own coin and make a whole lot of money then the price will drop back.

Well, that my friend, is one of the oldest pump and dump schemes that has been in crypto for as long as I can remember. These days, it's mostly influencers buying some shitcoin and then shilling it heavily on CT as the next multiple x. Mostly a 100x.

[irhact]

From my experience, here are 4 reasons I discovered:

1/ Lack of Discipline— a) Not sticking to one strategy, b) not respecting your trading rules, c) not sticking to your plan.

The first reason is why I think is more dangerous mad causes more losses to traders as they don't have good discipline. The lack of discipline should lead to many other problems for the trader as he won't know how to manage his trade. Since he isn't disciplinary, I don't think he'll be able to achieve his goals, the trading goals will always be forgetting as he gets other goals that he'll want to complete and still will fail to complete ot as he isn't disciplined.

As a trader, you'll always be encountering different problems that can make you to lose but you have to be disciplined and stay focused to trading without greediness. Don't go out of line from your trading strategy or you are going to lose and it'll affect you for the trade you would had done later. Learn very well how to trade so you can learn everything that you'll need to become a good trader

[BitMaxz]

Based on my experience I lose in trading due to my emotions I am afraid of losing much and I consistently trade without analyzing the market which makes me lose on every trade I make.

Right now patience is the key in trading based on what I experienced if you don't wait for a biased position you won't make a good profit in trading you should wait for long even it is 1 week you should wait until you see a signal and a good position this is what I learned during these months of trading  because if you consistently trade you will lose than making a profit and your win rate is pretty low compared when you wait for a biased position.

[BlackBoss_]

3/ Not having a mechanical trading system—This leads to emotional trading. Decisions driven by emotions like fear and greed rather than rational analysis result in significant losses.

You can trade manually or trade with bots but trading bots are set up by human. If you use bad parameters to set up your trading bot, trading result from the bot will not be good even it is not human and isn't affected by emotion.

Focus on investment is safer and better in capital protection against loss and it can help to get better ROI than trading. Trading manually or with bots, is always more risky than investment.

DCA for investment in Bitcoin is enough for me and I don't need to trade.
https://dcabtc.com/