Understanding Successful Stock Market TradersWhy do so many stock market traders go broke? As noted elsewhere on this site, the statistics relating to traders are quite shocking. The numbers located by your author suggest that: > 80 percent of traders last less than a year > 90 percent of all new traders lose all of their capital within the first year > over 90 percent of all traders fail These numbers actually relate to commodity traders rather than those specialising in stocks, but clearly there are some very strong parallels at work here. Here at StockExchangeSecrets.com , we are not trying to judge or moralise - we just want to get as many of the facts into the open as we can, in the hope that you, the reader, can make informed decisions about your own investments. One thing though is for sure - lots of stock market traders go broke. There may be several reasons why stock market traders fail and we submit that almost certainly the main one is psychological. This might seem strange to suggest, but for many people, gambling and trading are remarkably similar. In the UK, the gambling industry has admitted that around 93 percent of all regular gamblers on both horse and greyhound races lose money consistently. Lets all be clear, that is a very large percentage. Many people opposed to gambling would suggest that 93 percent is a low estimate... One thing is for sure, when one of the tools of your trade is money, it's value must take on an unusual role in the mind. After all, if most stock market traders, or gamblers - even successful ones - were to think to themselves that, "This trade (or bet) is worth more than most family cars", they may be a little more circumspect about the way they put it to use. Instead, they bet it on the turn of a card, or the movement of a stock or index - events which are almost certainly beyond their control. Then they do it again and again. It is the belief of your author that this ability to keep going again and again, even when on a losing streak - and they happen to everyone - is what makes for serious losses. Those that take part in the short-term market movements we discuss and survive for the long-haul are almost certainly people that make lots and lots of very small - sucessful - trades. As such, no position is so large that it may 'wipe you out', but instead they bank little profits every day. These people may never have the huge adrenaline rushes that come from large swings in fortune and the buzz of a big win, but they are almost certainly operating in a much more professional manner. As the new 'seat of the pants' operators come and go, these people are still booking their profits day by day and month by month. Long after many have quit, they will still be in the pits or in front of their screen, making their deals. Which is better? That is for the individual to decide. There certainly have been currency, commodity and stock market traders that have made hugely successful bets again and again. Some get out of the market with their profits, whilst others crash and burn. Huge fortunes can be made. But huge fortunes can be lost too. The real impact of this, often unseen by the many who see trading as glamorous is that a trader can lose everything they own on one position! This means that successful money management is a key ingredient in the success of a stock market trader. Clearly, this is not something that is picked up instinctively by many. In fact, unless the time is taken to study good money and risk management, most people will learn by trial and error. Learning through experimentation and mistakes can be expensive! In this regard as well as many others, we would suggest that hubris is a real problem for many new entrants to the markets. By overstating their abilities and / or knowledge or by underestimating the difficulty of making regular profits, many new traders find that they have only managed to learn a few of the vital lessons they need by the time they run out of money. Taking the time to study and think deeply about the behaviour of markets , traders and the individual is vital preparation. We recommend that before any financial commitments of this nature that everyone should take the time to really understand themselves and their abilities. We hope that you will spend more time reading this and other information sites about this subject to aid your progress. We also hope that you will invest the time, money and effort into using the following resources to build your knowledge base.
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