timothy sykes logo

Trading Tips-Tim Sykes Penny Stock

8 Reasons Why Traders Keep Losing Money

Timothy SykesAvatar
Written by Timothy Sykes
Updated 2/8/2021 17 min read

There’s a lot of discussion on why most traders lose money… 

Every trader has ups and downs. But if you’re losing money habitually — and most traders do — chances are there are some simple explanations as to why.

Luckily, just because you’ve been losing money doesn’t mean you have to keep losing at the same rate.

There are some common bad habits that can cause traders to keep losing. Identifying these habits is the first step to changing them.

Here, I’ll talk about eight common reasons why most traders lose money and how you can work to turn things around.

Do Most Traders Lose Money?

why do most traders lose money
© Millionaire Media, LLC

Some people say, ”95% of traders lose money” or “90% of traders lose.” But how true is that?

Different studies come up with different numbers. Nobody knows for sure, maybe because this industry is full of fakes and liars.

That’s why I created Profit.ly — to add some transparency to this industry. But a lot of traders want to hide behind screenshots showing off ‘massive’ profits.

What they don’t tell you is how much capital they’re risking or how much they lose when trades go against them.

Every trader loses, at least some of the time. Losses are part of trading — accept it.

I’ve been trading for more than 20 years, and I still only win about 77% of the time. But I’ve been able to grow my account to over $6 million.*

(*Please note: My results are far from typical. Individual results will vary. Most traders lose money. I have the benefit of years of hard work, dedication, and experience. Trading is inherently risky. Do your due diligence and never risk more than you can afford to lose.)

So what’s the number? Is it 80%, 90%, or even 99% of traders consistently losing? The exact numbers don’t matter. The fact that the majority of traders lose money is concerning enough.

But there’s a potential solution to the problem of why most traders lose money — education!

Here’s why I think most traders lose money and why you don’t have to make the same mistakes

What Percentage of Traders Are Successful?

why most traders lose money what percentage of traders are successful
© Millionaire Media, LLC

We don’t know the exact numbers of successful or losing traders. But I think it’s safe to say that the percentage of day traders making money is significantly less than the percentage who lose.

I think the main reason there are so few successful traders is simple: Most people are lazy. They don’t want to put in the work. They want someone to tell them which stocks to buy, when to buy, and when to sell.

To make it in the market, you need to become self-sufficient.

Trading isn’t easy. Too many people come into the market with the mindset that they can get rich quick. That’s probably why they lose.

You have to focus on the process. You need a pattern and strategy you can repeat over and over again, yet still be ready to adapt.

Keep your losses smaller than your gains. Go for singles instead of home runs. That way, small gains add up over time.

The 8 Reasons Why Most Traders Lose Money

reasons why most traders lose money
© Millionaire Media, LLC

Now, let’s get to my list of reasons why most traders lose money…

#1) They Don’t Understand How the Stock Market Works

Post image

Get my weekly watchlist, free

Sign up to jump start your trading education!

Why walk when you can run?

If that’s your mentality, chances are that you didn’t bother to learn how the stock market really works before you started trading.

Listen, I’m all for diving in and going for it — with a plan. It’s important to have some bravery and bravado.

But if you want to find consistency in the stock market, you’re going to have to invest some time in learning stock trading rules first.

All the knowledge you absorb will make you a better trader.

#2) Why Most Traders Lose Money: They Don’t Save

What do you do after a successful trade? Do you go out and splurge?

That could be why you keep losing money.

You need money to make money. Growing an account is much harder if you keep blowing your proceeds. You won’t have more money to trade, which means you could be putting a cap on how much you could make.

Many top traders save a big portion — sometimes even the majority — of what they make.

This is because they know that by saving their money, they’ll have more to put toward the next trade.

#3) They Don’t Track What’s Working

As you grow as a trader, you should notice that some things work and others don’t. But are you really taking the time to evaluate what’s working and why?

Don’t waste your time on processes and trades that aren’t serving you.

Evaluate your goals often and see what’s working to propel you in the direction of your goals.

Sometimes, it’s easier to see what’s not working than what is. But also note what’s working for you, so you can keep doing it well and refining it.

Use Profit.ly, a trading journal, or a spreadsheet to track your trades. Record your trading plan and your reasons for the trade. After the trade, record how you traded it, how you were feeling, and what you could do to improve next time.

#4) You Don’t Have a Mentor

What if I told you there was a single step that you could take to speed up your learning curve, diminish losses, and propel you to faster success?

Well, there is such a step, and it’s as simple as this: find a mentor.

A mentor is someone who has already been on the path that you’re just starting on.

By learning from an established trader, you can accomplish in months what could otherwise take years.

Basically, you get the advantage of their hard-earned knowledge. This can help you to avoid common mistakes and to grow faster. It can be amazingly effective.

I started teaching to be the mentor that I never had. There were no mentors when I started trading, so I learned all my lessons the hard way. But you don’t have to … If you’re ready to learn how to trade with rules, a process, and a mentor, apply for my Trading Challenge. 

You’ll get access to my video lessons, DVDs, webinars, and my Challenge chat room.

#5) They Don’t Do Research

Never follow alerts — it’s a key reason why most traders lose money. My alerts are to help students learn the process. But penny stocks move fast. By the time you get the alert, the play can be long gone.

So do your own research before every trade.

Wake up early so you have time to find potential trades and scan the market with this awesome scanning tool.

Always be prepared.

#6) They’re too Scared to Fail

New traders can be so afraid of losing money that they only pursue trades with minimal risk.

Learn this now: trading is risky. Yes, it’s scary. You might lose money.

The key is to start small to get a feel for the risk. I trade scared. That means I often take profits too soon. But small gains add up. And cut losses quickly. It’s my #1 rule for a reason.

I don’t love risk and you don’t ever have to either, but you do have to create a better relationship with it.

#7) They Don’t Learn From Mistakes

You will make mistakes as a trader. You will lose money.

But another reason why most traders lose money is that they fail to learn from their mistakes.

When you make a mistake or a trade goes bad, take time to reflect on what went wrong. It can help you avoid that error in the future and emerge stronger.

supernova placement

#8) They’re Stuck

William S. Burroughs said, “When you stop growing, you start dying.” This is absolutely true when trading.

Maybe you’ve figured out a good system that’s working for you. But will it keep working in exactly the same way, forever?

No way. It’s important that you keep growing so that you can remain nimble and adapt as the market shifts.

The key is to never get complacent and think you’re done learning.  I urge you to continue to learn, network, and obsessively follow the market.

That can help you stay in the game longer.

Losing money every now and again is part of the process of trading. But if you notice that it’s happening over and over, it’s time to make some changes.

Making simple changes in your habits and in the way that you approach your work can go a long way toward helping you reduce your losses.

How to Find Your Market Stride

why most traders lose money how to find your market stride
© Millionaire Media, LLC

Once you have a strategy that works for you, you have to learn to…

Take What the Market Gives You

You can’t impose your will on the market. It owes you nothing. If you’ve found some success with a strategy, it’s important to rinse and repeat — and adapt when it stops working.

Some traders find a bit of success and think they have the market figured out. They take on more risk, use bigger position sizes, and go for home runs. It can result in account blow-ups pretty quickly…

Stay humble, disciplined, and always be ready to…

Adapt to Market Changes

Trading isn’t an exact science — the market is like a moving target. You constantly have to learn and adapt. Patterns work one day, then they don’t. The market’s always changing. Never get too comfortable with a strategy or pattern.

Recognize when things aren’t working and adjust your plan. Don’t try to force trades. Study the past, learn old patterns, watch the current market, and paper trade new strategies on StocksToTrade.

And always…

Use the Right Broker

You need the right broker for your trading strategy. If you trade over-the-counter (OTC) stocks, you need a broker with good executions. If you short sell, you need a broker that has shares to borrow and lower fees and interest.

These are the brokers I use.

It’s also important to find the right platform and tools for your trading style. StocksToTrade has all the tools you need to trade penny stocks. And it has broker integration, so you can link your account and trade right through the platform.

Get a 14-day trial of StocksToTrade with the Breaking News Chat for $17.

(Quick disclaimer: I proudly helped design and develop StocksToTrade and am an investor in it.)

Frequently Asked Questions About Why Most Traders Lose Money

why most traders lose money frequently asked questions
© Millionaire Media, LLC

Do Most Options Traders Lose Money?

Yes, most options traders lose money. Just like trading, it’s not a way to get rich quick. Trading options is complex and risky.

Why Do Forex Traders Lose Money?

Most foreign exchange (forex) traders — like most traders — lose money because they don't have a risk management strategy. You need to have a plan for a trade before you take it. That includes where you’ll cut losses when the trade goes against you. Then you need the discipline to stick to your risk level.

Why Intraday Traders Lose Money

Most intraday traders lose money because they treat trading like gambling. They see a stock going up, so they buy it. And they don’t have a plan for cutting losses or where they’ll take profits. So they end up holding and turning a trade into an investment.

Conclusion: Why Most Traders Lose Money

I’ve been trading for over 20 years, and I’ve been a teacher for over 10. In that time, I’ve met a lot of traders and taught a lot of students.

I can tell you what I think about why most traders lose money. They lack either education, discipline, or dedication and persistence. Or they have too big of an ego and can’t take the losses.

Accept that you’ll have losing trades. You won’t win 100% of the time. You also need a risk management strategy to keep your losses smaller than your gains. My #1 rule is to cut losses quickly. 

watchlist banner

And don’t let small losses get you down. Learn from your mistakes and move on. There’s a ton of opportunities in the market. There’ll always be another play.

If you want to learn how I trade penny stocks, and the rules that have kept me safe in the market for over 20 years, apply for my Trading Challenge.

Why do you think most traders lose money? Let me know in the comments!  

How much has this post helped you?

Leave a reply

Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”