Friday, August 24, 2012

Brandt on why novice traders lose money

In his Post dated August 16, Peter Brandt gives reasons why novice traders lose money. This is what he says:

There are many reasons why 80% to 90% of novice traders end up losing money. Among the reasons include:
  • Being under capitalized
  • Taking way too much risk (expressed as a % of capital per trade)
  • Attempting to pick tops and bottoms
  • Chasing markets
  • Becoming obsessed by a scenario (e.g., Silver MUST go up)
  • Trading with trading range
  • Being compelled to become a day trader
I believe the above reasons, in composite, account for 80% of the failure among pedestrian traders.
When I talk about “trading with trading ranges,” my specific reference is to the habit of buying on bulges and selling on dips or buying at the top end of the ranges and selling at the bottom end of ranges. The mentality of the novice trader in this regard goes like this … “The market is really strong, it is going to breakout out this time … I want to get in before it breaks out.”

My Notes:

Peter avoids all trading inside a trading range, buying only after a break out, selling  after a breakdown.

17 comments:

Akash said...

HI," May your birthday be filled with sunshine and smiles, laughter, love, and cheer.happy birthday.

Sameerbhai Limaye said...

Wish you many many happy returns of the day Sudharshanbhai. Your calm,composure and confidence in trading decision making always inspires me and I am sure all of the fellow traders.

God Bless You!
Seeking your blessings as always,
Sameer Limaye

Shahii said...

Good Read. Want to add one more reason for loosing money.

We tend to over trade.

http://rideniftywithshahi.blogspot.com/2012/07/why-do-we-traders-tend-to-over-trade.html

Unknown said...

I was looking at this Video of Sudarshan Sukhani in youtube. He is Bingo right on his prediction that market will be in a trading range for long time.
http://www.youtube.com/watch?v=0-HMaFk27lM&feature=relmfu

Dinesh said...

Dear Sir,
Wishing you a very long, joyful, healthy and prosperous life. Hope the almighty God always shower his blessings on you.
I fully agree with your advice and have personally gained out of this approach. I think this is the safest approach for a trader.
Regards,
Dinesh

Rakesh Shethia said...

I have couple of questions on range bound markets.
1. How do we identify a range within a range (if you can explain with graphical example please)

2. How does one enter a trade after a breakout, straightaway while a breakout occurs? or wait for a pullback? In what scenario would it be advisable to wait for a pullback? How deep should be the pullback for a breakout to be still considered so?

3. When can one conclude that the breakout is false? Does one switch trade as soon as the breakout is confirmed as false?, Again, what should be the stop for a trade entered on false breakout.

Singh Gajendra said...

Hello sir
I pray to God to meet u on some day, as you are one of the most valuable person on the planet ,for every trader of the world .
I pray to God to see u every day, listen u every day ,as u speak and teach me on every speech , I get lesson for life .
Sir ,want to pay thanks in real sance from bottom of my soul .

VIJAY CHOTHANI said...

DO YOU HAVE ANY CHAPTER IN MUMBAI OF ATA

VIJAY CHOTHANI said...

the ATA forum promoted by you has a mumbai chapter?

oracle said...

u get lost from cnbc...as soon as possible otherwise ...

sudhin said...

Sir, you had once said on cnbc that can bank would go to 1000 when it was around 7-800 odd, don't you think it contradicts your view that it may go higher?

pranav.kulkarni said...

Dear sir,
Belated very happy birthday. May god gives you all the happiness of the world.
Sir, whats your take on hedging? How can it be profitable?? and when one could suffer loss, if any??
thanks n regards,
pranav

Amit Trivedi said...

hello Sir, Can i've topics that you have covered in your Book..'Trading the Markets'...Is it more on chart pattern side?

amarjeet said...

RESPECTED SIR,
I LOV U & UR ANALYZE.SO I USE UR INDICATOR IN ANALYZE.BUT ONE QUESTION IN MY MIND.FROM LAST FEW DAYS I USE (ON BALANCE VOLUME) WITH 21 DAY WEIGHTED MOVING AVERAGE.WHICH ALSO GIVE GOOD SIGNAL .SO I REQUEST U PLEASE USE IT GIVE SOME ADVICE ON IT.BECUASE I LEARN EVERYTHING FROM U. WHICH NOT IN BOOKS.

amarjeet said...

SORRY SIR
OBV WITH 21 DAY WEIGHTED MOVING AVERAGE.

Bappa said...

Sir,

Today I went to the CNBC Investor Camp, Kolkata. It's a pleasure to meet with you. Got your Autograph and it has a special corner in my heart. :)

Thank you so much.

Kalyan said...

Dear Sir,

Today I've been to the CNBC Investor Camp, Kolkata. I was a pleasure meeting you and collected your Autograph. :)

Thank you so much.