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The 3 Reasons Why 90% of Traders Fail

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Written by Timothy Sykes
Updated 10/2/2023 7 min read

I’ve detected specific patterns in my journey, from starting with just $12,415 to amassing over $7.5 million in trading profits and mentoring some of the trading world’s rising stars.

You see, many traders possess the drive, but they often stumble over the same hurdles.

It boils down to more than just picking the right strategy…

It comes down to three prime reasons most traders fail.

However, once you understand these, they could be revelations to your trading.

#1 The Allure of Quick Money: Impatience is a Killer

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We live in a world of instant gratification. Fast food, next-day deliveries, binge-watching… we’re wired to expect results NOW.

And this mindset, sadly, infiltrates our trading habits. I’ve seen way too many traders, itching to jump on every ‘opportunity’ without analyzing if it aligns with their strategy.

They’re not in the game for the long run; they want a quick buck. But here’s the kicker: the market doesn’t care about your impatience.

By failing to wait for the right opportunities, you’re setting yourself up for failure. Remember, trading is not a sprint; it’s a marathon.

My most successful students struggled to make money in their first year, some didn’t see results until year two or three.

But results shouldn’t be measured in profits in your first few years but in knowledge gained.

Those looking for shortcuts are in for a rude awakening.

#2 The Ego Trap: Overconfidence and Revenge Trading

Once you’ve understood how the markets work and found good trades, the next step is managing your emotions.

The ego is possibly one of a trader’s worst enemies. Winning feels good. And after a string of successful trades, it’s easy to feel invincible. But the market is an unpredictable beast. Overconfidence blinds traders to potential risks, making them disregard solid trading rules and risk management.

And then there’s revenge trading. After a loss, the urge to make back that money can be overwhelming.

Instead of stepping back and assessing what went wrong, traders dive back in, often with larger sums of money, trying to “win” against the market. Spoiler alert:

The market always wins.

After suffering one of my worst losses in years a few months back, I was forced to scale back my trading and play smallball.

Did I want to make those losses back right away?

Of course.

But I also that kind of mentality will dig you in a deeper hole.

That’s why I chipped away, month after month.

I’m now starting to find my groove again, and it feels even better, because I know I did things the right way.

#3 Emotional Attachment: The Inability To Cut Losses

Trading mentor Tim Sykes realizes he made a trading mistake
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This is a big one. Many traders have a hard time accepting that they’re wrong. They become emotionally attached to a position, hoping it will turn around, even praying it will. But hope isn’t a strategy.

Every trader, including yours truly, will pick losers now and then.

What is the difference between success and failure?

It is knowing when to cut your losses.

Holding onto a sinking ship because of pride or emotional attachment is a surefire way to torpedo your trading account.

 

Want To Be The 10% That Make It?

© Millionaire Media, LLC

In trading, knowledge alone isn’t power. True power lies in combining knowledge with discipline.

It’s not enough to know what to do; you must have the patience and fortitude to do it consistently.

I’ve been in this game long enough to have seen all the pitfalls and trust me, if you don’t address these issues, they’ll cripple your potential.

Even with over $7.5 million in trading profits and mentoring numerous successful traders, I’ve seen countless stumble over the same hurdles. It’s not just about strategies; it’s about discipline, mindset, and facing the brutal realities of the market.

🔥 Are you guilty of seeking quick profits without patience?

🔥 Ever been blinded by overconfidence or attempted revenge trading?

🔥 Found yourself emotionally tied to a trade, unable to cut losses?

These pitfalls have claimed many, but they don’t have to define you.

🚀 Dive into my upcoming live training sessions this week.

🚀 Grasp actionable strategies to overcome these common trader traps.

🚀 Witness firsthand analysis, unveiling the intricacies of the ever-evolving market.

🚀 Don’t just react – master the art of predicting and capitalizing on market shifts.

Ready to transform these challenges into stepping stones for monumental success? Your roadmap to mastering discipline in trading awaits.

👉 CLICK HERE TO ELEVATE YOUR TRADING GAME!👈

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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

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* 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”