Statistics show the popular notion in the trading industry that most traders lose money is real. In this era of the internet, trading is done with a click of a button. Anyone, with or without expertise, can enter, exit, and trade at any point in time.
Hence there is a kind of chaos. Trading is being done randomly, and there is no plan of action based on thorough research of market dynamics.
The motive of most of the traders is to earn fast cash. In a rush to see the profits, traders put their hard made money in risky trades, over-trading, and exiting as fast as they entered into the trade.
The policies to wait and watch, diversify, and calculate risks have taken a back seat.
Experts have come up with some logical figures by researching on a large chunk of trading data. That would indicate a pattern in the trading activity and behavior as well as highlight the causes of loss:
The risk-taking behavior analysis from the data revealed specific patterns:
These discoveries show the traders tend to gamble more than doing the trading based on tried and tested methods or learning from long term trading. They are after making quick bucks, which cannot happen in the stock market.
Hence they get frustrated soon and leave. The trading and investing is based on calculated risk-taking strategies, and one can only reap the fruit by developing knowledge and skills over a long period.At the same time, trading success requires a thorough understanding of sociology-political scenarios and knowledge of how the economy is likely to respond to these events.