Biggest reason is Greed and Fear
why? you may ask but first hear me out on this
you may see so many people on the internet singing how their strategy is having 90% accuracy.If you think trading works like that stay away from trading.most people come into trading with the mindset that they will become Ambani or Tata within a weeks of trading after finding a strategy which gives them consistent money. they think trading is very simple all you have to do is click mouse and buttons.buy when the stock is down sell when the stock is high. to them trading is confined to this only. they think Trading is easy because it requires no specific University program.
coming back to my main answer of how greed and fear is most important in trading.The individual desires and intentions of day traders can substantially influence the outcomes of their efforts. A bit of success can lead to greedy actions that stray from an established trading plan and they may end up putting all their money in one trade and blowing their money(just like i did in my initial time). These can include taking action too soon, holding on to a profitable gain for too long, or not cutting losses soon enough in a losing trade.
see how your emotions effects your trading!
coming to my story how i had to pay huge sum of money and time because i refused to accept the real trading and came in lure of telegram, youtube channels
I spend one complete year in trying to find the holy grail.One indicator that could print money and i could just sit and watch my bank balance grow.If you are still trying to find it let me tell you market doesn’t works like that.if there was anything like that everyone would be making money but we know that’s not true.
so how many people are profitable in trading. Answer is few.why? you may ask
because sadly market works like this only.trading is a zero sum game which means someone loss is another person’s profit.
to better explain here is an example
imagine being in a room with 5 people and the net money combined in that room is Rs 1000.you people gamble with each other thus creating something like a artificial market and buying and selling transactions happening. this is how trading works.just taxes and brokerages are deduced at each transaction. you might then think then isn’t trading gambling then?Answer is no. do people make money in trading?yes people are making money in trading like proprietary trading firms and institutional buyers.
(proprietary trading desk)
do retail traders like us can also make money? yes one famous known retail trader is a
29 yrs old japanese takashi kotegawa who turned $13K into $153 millions! yes you read it right.
yes you can make money in trading but it requires you to have an edge over others.its just like how casinos owners have. no matter how many or big you win in the long run you always end up loosing against the casino because they have the edge
Another example
imagine roulette game in which there are 49 backs and 49 reds and two null spots and you have to bet on red or black .no matter what you bet on your probability of winning is 49/100. that’s why no one got rich by gambling. just like in trading you need to have a small edge no matter how small just one good back-tested edge which you can scale up with margin.
now imagine having a good risk management setup for example 1:3 i.e for risking every Rs 1 you get Rs 3.now tell me how many trade you need to win out of 10 in order to be in minimum profit? Answer is only 3. total winning amount becomes Rs 9 and minus Rs 7 from the losses makes total profit of Rs 2 . but finding setups and knowing which target they are able to achieve is also important .i have being trading with my own edge. it took me time but i am consistent now.