How do so many people lose money?

[europeanson7]

Hello,

I am fairly new to forex trading. I read the statistic that 90%-95% of forex traders lose money. However, reading forums such as these there as so many systems that claim to have profitable results, and are backed by literally thousands of posts on each system. How are so many people losing money if it's as easy following a free system posted on the internet? Are these systems not actually profitable, or are the masses too stupid to follow the guidelines exactly?

Another thing that I find laughable is when people say you need to find a system that fits yours personality. What does following directions have to do with my personality? Take the Ozfx system that I have been reading a lot about recently. It has clearly defined entries and exits. There is a right and a wrong way to follow the system, it's not subjective. I probably could have followed the system in 3rd grade if I had someone to teach it to me. My personality has nothing to do with anything, I either follow the system exactly or I don't. So what do you think, guys, do most traders lose money because the systems are not profitable or are most people just too stupid to follow directions?

[daydreamer65]

So what do you think, guys, do most traders lose money because the systems are not profitable or are most people just too stupid to follow directions?

This is basically the answer, but not quite, people think they
are too CLEVER to follow a system or they need to make the
system more complicated.

That is the reason for finding a system to suit your personality,
if you can't sit still on a trade find a scalp system, if you are
ok to set the trade & leave it, go for a longer term system.

But when it gets down to the nitty gritty most people are looking
for a get-rich-quick scheme & gamble rather than trade, which is
a sure way to lose it all, takes too much time to learn to trade.

[Andrewunknown]

Originally Posted by europeanson7

Another thing that I find laughable is when people say you need to find a system that fits yours personality. What does following directions have to do with my personality? Take the Ozfx system that I have been reading a lot about recently. It has clearly defined entries and exits. There is a right and a wrong way to follow the system, it's not subjective. I probably could have followed the system in 3rd grade if I had someone to teach it to me. My personality has nothing to do with anything, I either follow the system exactly or I don't. So what do you think, guys, do most traders lose money because the systems are not profitable or are most people just too stupid to follow directions?

Following directions has a great deal to do with your personality, actually. If you're an automaton, mechanistic adherence to a system is simple - ask anyone that programs expert advisors. Inclinations, appetites, misgivings, overconfidence, naivete, bias, impatience and plenty of other foibles all dictate and in many cases can sabotage your trading. Methods/systems vary in quantity of entry signals generated, screen commitment, amount of capital risked, timeframe used etc., with a method configured in one way more amenable to a person with a combination of personality characteristics than others. Both of the reasons you've provided concerning why traders lose money are correct, but there is a third - lack of candid self-understanding - that is primarily responsible. You could call it self-stupid, if you like.

And I don't simply mean "personality type A matches well with system A1, personality type B matches well with system B1", etc. I mean what most traders - and non-traders - lack: humility (before the market in our case) and a developed capacity for self-cognizance, self-criticism, self-correction and discipline.

Add all of that together, and it is no wonder most (the 95% statistic was originally directed toward futures traders) traders fail, despite manifestly simple and objective entry and exit criteria.

[VingTsun]

IMHO,i would say that so many people are loseing money because of education.
Have anyone tried to open an automehanic reparation store after reading 5 books about automehanics?Or has any one tried to fly an jumbo-jet after playing simulation game on PC?I think that there are many peeps who just cant wait to start trading live and have not enough patience for learning proces.So they lose.
Also,i am shure that there are many people wich are thinking that they can open micro account with 500$ and become rich mother f.....s in few months,but all they get is - on they account.
For shure,there are more reasons why one can lose $$$ on FX market.

I am stil faaaaaar away from even thinking about opening an live account,and i am aware that i must live,eat,dream(this one is for real,when i lie down in bed and close mine eyes i see candlesticks jumping around! LOL),breath FX on dayli basis because IMHO this is the only way.
But approaching the subject with common sense and cool head could help a lot(i think so..)
Cheers!
VingTsunKuen

[rhodytrader]

Originally Posted by europeanson7

How are so many people losing money if it's as easy following a free system posted on the internet? Are these systems not actually profitable, or are the masses too stupid to follow the guidelines exactly?

In part, some of the systems you see out there aren't work the time it takes to read them. There are a lot new traders trotting out ideas they have which either haven't been properly tested or are only good under certain types of market conditions. The other part, as others have noted, is lack of education, an overly inflated ego, lack off appreciation for the risk, and a few other related elements.

Another thing that I find laughable is when people say you need to find a system that fits yours personality. What does following directions have to do with my personality?

I'm glad you get a laugh out of that because I'll be laughing as I take your money.

OK, that might have been a bit more mean than I'd usually be, but you're speaking from a decidedly narrow perspective and without much in the way of experience at all. If it were only folks posting here saying matching your trading to your personality is important, then you might be able to write it off. However, when folks who have made many millions of dollars in the markets say the same thing, I think you want to take it seriously. Read Market Wizards.

[randont]

Originally Posted by europeanson7

Hello,

I am fairly new to forex trading. I read the statistic that 90%-95% of forex traders lose money. However, reading forums such as these there as so many systems that claim to have profitable results, and are backed by literally thousands of posts on each system. How are so many people losing money if it's as easy following a free system posted on the internet? Are these systems not actually profitable, or are the masses too stupid to follow the guidelines exactly?-Thats pretty arrogant to assume they're stupid for not following the system. One thing I've learned over the time I've been doing this is EVERYONE reacts the same way ie fear, greed, and panic. Those that learn to deal with it go on to be successful, those that don't, don't. Closest thing I could relate trading too is fighting. You can do all the simulations and book learning. Nothing will prepare you for the real thing.

Another thing that I find laughable is when people say you need to find a system that fits yours personality. What does following directions have to do with my personality? Take the Ozfx system that I have been reading a lot about recently. It has clearly defined entries and exits. There is a right and a wrong way to follow the system, it's not subjective. I probably could have followed the system in 3rd grade if I had someone to teach it to me. My personality has nothing to do with anything, I either follow the system exactly or I don't. So what do you think, guys, do most traders lose money because the systems are not profitable or are most people just too stupid to follow directions?

If you think it's a matter of intelligence you've got a LOT to learn. Psychology plays a huge roll in trading.

As far as a system that fits your personality. I see your point and to a degree I agree. Our whole purpose is to make money. Whatever system will do that for you is the one you should be using. One that fits your personality could possibly be easier for you to make money with though.

[mytwopips]

Here's another important reason on how you will lose money but not mentioned before that I know of.

Beer drinking time is beer drinking time. Trading time is trading time. Don't do both at the same time.

Don't believe me, try it.

I will post in my thread the results of a real world "experiment" of the above at the end of the week.

[europeanson7]

Originally Posted by VingTsun

IMHO,i would say that so many people are loseing money because of education.
Have anyone tried to open an automehanic reparation store after reading 5 books about automehanics?Or has any one tried to fly an jumbo-jet after playing simulation game on PC?I think that there are many peeps who just cant wait to start trading live and have not enough patience for learning proces.So they lose.
Also,i am shure that there are many people wich are thinking that they can open micro account with 500$ and become rich mother f.....s in few months,but all they get is - on they account.
For shure,there are more reasons why one can lose $$$ on FX market.

I am stil faaaaaar away from even thinking about opening an live account,and i am aware that i must live,eat,dream(this one is for real,when i lie down in bed and close mine eyes i see candlesticks jumping around! LOL),breath FX on dayli basis because IMHO this is the only way.
But approaching the subject with common sense and cool head could help a lot(i think so..)
Cheers!
VingTsunKuen

What's the point of doing all that stuff if a system like Ozfx's works? I guess what I'm asking is do systems like his (or the Cowabunga system for another example) work? Because if they do I don't see the point in doing all that work.

[rhodytrader]

Originally Posted by europeanson7

What's the point of doing all that stuff if a system like Ozfx's works? I guess what I'm asking is do systems like his (or the Cowabunga system for another example) work? Because if they do I don't see the point in doing all that work.

I don't know either system, nor do I care to. That said, it's more a question of whether you can consistenly trade the system. The best system in the world doesn't mean much if you can't stick to it. And systems which don't fit your personality are hard to stick to because they will invariably do something which is counter to how you operate. Some have long drawdown periods. Some require more or less risk taking than is comfortable. Some don't operate in the right timeframe. All systems go through rough patches, which is when folks tend to bail out of them because they don't really have the faith required to stick it out.

[Sweet Pip]

A system won't work by itself...it needs a trader to take advantage of it when it's in the "best interest" of the trader to take the given profits.

Not all signals in any given system are created equal. Some are valid, some are fake...some are strong to get many pips, others will give some but may not reach the target before becoming a loss...how will you know the difference?

Just about any system will work, but if you work it like a robot, it won't do as well as if you work it with an edge/knowledge. You get that edge/knowledge by "doing all that work".

Just like driving...sure the car works but do you know how to drive? Did you learn to read the street signs, know what the instruments/switches on the dashboard mean/do...cause if you don't you'll surely get into an accident!