# Why do people lose money in the stock market?



## Elliot

I am wondering how do individuals lose money in the stock market?. Do they fail because of there lack of knowledge in Economics, Finance and Sharing Trading and TA Software ?. Do they just see $$$$ signs everywhere and splash there cash around hoping on luck ?. I mean how do some investors fail in investing there money successfully in the stock market?.

All I hear in regards to the stock exchange people losing money I even know people who have halved there investment money in the stock exchange when trading shares. I hear that its a system made to lose money rather then make money?.

Are there any well written share trading books with strategies that can atleast some what help reduce your risk of losing all your investment money in the shares?

Thanks


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## Gringotts Bank

Elliot said:


> I am wondering how do individuals lose money in the stock market?. Do they fail because of there lack of knowledge in Economics, Finance and Sharing Trading and TA Software ?. Do they just see $$$$ signs everywhere and splash there cash around hoping on luck ?. I mean how do some investors fail in investing there money successfully in the stock market?.
> 
> All I hear in regards to the stock exchange people losing money I even know people who have halved there investment money in the stock exchange when trading shares. I hear that its a system made to lose money rather then make money?.
> 
> Are there any well written share trading books with strategies that can atleast some what help reduce your risk of losing all your investment money in the shares?
> 
> Thanks



This is just a brief answer but to trade short term you want

1) a reliable edge
2) If swing trading, aim to make your winning trades at least twice the size of your losing trades .  If momentum trading, aim to let your profits run as far as possible and cut your losers short.  You can do this by setting profit targets and stop losses on each trade ahead of time.
3) risk the same $ amount on each trade (or maybe a multiple of that amount depending on confidence).
4) the right mindset 

1 and 4 are essential, imo.
2 and 3 are a very good idea, perhaps not essential.

Others will have different views.


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## minwa

Simple, it's a zero sum game. (Negative if you include fees)

A bit like throwing some food into a cage of lions. The toughest few will get most of the food while the rest won't get much.

No matter how good of investor everyone is, a few with slightly better abilities will take the money from the rest.


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## pixel

minwa said:


> Simple, it's a zero sum game. (Negative if you include fees)
> 
> A bit like throwing some food into a cage of lions. The toughest few will get most of the food while the rest won't get much.
> 
> No matter how good of investor everyone is, a few with slightly better abilities will take the money from the rest.




+1 exactly


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## Sharkman

why do people lose money in the stock market? in my opinion - emotion. people let their emotions get the better of their rational thought processes, and as minwa said, others prey on that and take advantage of the foolish decisions that result

and i'm not saying i've mastered the emotional game either. i haven't. only a couple of weeks ago i made a dumb decision to not close out a vertical put spread that had already reached 80% of maxxing out, just because i was fuming at the MMs. it didn't turn out very well


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## stewiejp

Emotion, yes, also greed, lack of knowledge or pure bad luck. I'm relatively new at this, sort of - have been buying shares for a long time but only really became interested and involved the past two years. For that reason, since I am still learning I have bought some fairly defensive, "safe", long term stocks and sat on them while I learn a bit. I'd say in another year or so I will look at strategies other than "long term", "buy and hold", even though I am quite happy with how my last year went.

People new to the game see reports of big gains, and think, "I can do this" and start to get a bit excited... Eventually they may have a bit of bad luck (or make bad decisions), and they lose some dough - the market may be down a bit, and they may make that money back in a week/month but they get emotional, panic and withdraw the lot, causing another "failed stock market player". Best to learn what you are doing before playing the big shot IMO.


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## cbc

Noobs,


Newbyz always make mistakes,  usually by lack of experience.


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## howmanyru

Because it's a mixture of experience, time, timing, planning, thinking, knowledge, skill, art, emotion, & psychology - how many people have all mastered all that?  Oh, and luck plays a part, but don't reley on that.


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## pavilion103

Ignorance

Lack of knowledge of what it takes to be successful in the markets.

Lack of willingness to commit the time and effort to find out.


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## payday

cbc said:


> Noobs,
> 
> 
> Newbyz always make mistakes,  usually by lack of experience.




Yup - and then they get a win or 2 and all of sudden develop "confidence" and blow the lot.


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## Boggo

They trade management behaviour instead of stock price behaviour.
Refer to RED and PEN threads for examples.


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## tech/a

Generally people don't take control of their investments.
But the market does.


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## sydboy007

too many buy high and sell low

sounds simple but the WB principle of buy  when others are fearful and sell when others are greedy is not always easy to do, especially the the buying when all you hear is doom and gloom end of the modern world as we know it.

A simple way for me to get around this is to make notes of the reasons I bought a share.  I currently buy with the intent of holding for the long term, but when the share price does move a lot - in either direction - i revisit my reasons for buying and if that still seems valid I'll hold my ground.

Only problem is the market can be irrational for so long as to wear out even the most patient investor.  TBH I rarely think the market is rational and more a sentiment game of musical chairs.


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## MARKETWINNER

Even expert make mistakes. Nobody can win market all the times. Experienced players have edge over others. Stock markets look for future events.New players should learn as much as possible. Nobody can predict 100% correctly.


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## TheUnknown

Many people lose because they are new to the game.

Put it in a simple way, if an expert gets 6 or 7 at best out of 10 trades right, what hope does the average joe have at the beginning ?


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## tech/a

TheUnknown said:


> Many people lose because they are new to the game.
> 
> Put it in a simple way, if an expert gets 6 or 7 at best out of 10 trades right, what hope does the average joe have at the beginning ?




As much hope as any if he knows that it's not about being right.

There is another way.


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## TheUnknown

tech/a said:


> As much hope as any if he knows that it's not about being right.
> 
> There is another way.




...


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## payday

tech/a said:


> As much hope as any if he knows that it's not about being right.
> 
> There is another way.




Spot on tech.


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## Calliope

TheUnknown said:


> Many people lose because they are new to the game.
> 
> Put it in a simple way, if an expert gets 6 or 7 at best out of 10 trades right, what hope does the average joe have at the beginning ?




Mark Twain got it right;

"Let us be thankful for the fools; but for them the rest of us could not succeed."

Remember that every time you buy shares, the guy selling the shares is probably smarter than you.


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## TheUnknown

I don't think i said something stupid did i ?


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## tech/a

TheUnknown said:


> I don't think i said something stupid did i ?




No
Perhaps in complete 
But the criticism is harsh!


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## robusta

I think there are two main reasons.
This is the first.


sydboy007 said:


> too many buy high and sell low
> 
> sounds simple but the WB principle of buy  when others are fearful and sell when others are greedy is not always easy to do, especially the the buying when all you hear is doom and gloom end of the modern world as we know it.




We all know how it works, buy up before the GFC because prices are going up and everyone is making money and sell after the crash because stocks are too risky. Rinse and repeat.

The second is too much of a short term attitude. For the minority that can make money trading shortterm I have nothing but the utmost respect. They have so much stacked against them; high frequency trading, dark pools, transaction costs, frictional costs...

This link has some returns from the US over a long period.

http://www.fool.com.au/2013/07/04/how-you-can-beat-the-investing-professionals/

Imagine how much better the returns would be if there was some way to pick businesses with some sort of competitive advantage at a reasonable price?


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## ROE

Elliot said:


> I am wondering how do individuals lose money in the stock market?. Do they fail because of there lack of knowledge in Economics, Finance and Sharing Trading and TA Software ?. Do they just see $$$$ signs everywhere and splash there cash around hoping on luck ?. I mean how do some investors fail in investing there money successfully in the stock market?.
> 
> All I hear in regards to the stock exchange people losing money I even know people who have halved there investment money in the stock exchange when trading shares. I hear that its a system made to lose money rather then make money?.
> 
> Are there any well written share trading books with strategies that can atleast some what help reduce your risk of losing all your investment money in the shares?
> 
> Thanks




Who are these people   Are they investors or gamblers? 

"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative." Ben Graham

if you are an investor, you would spend the time and the effort to make sure you invest in sound business
that deliver you adequate return over a long period of time...

This obviously doesn't guarantee you make money but I have not meet a person that follow these methods
lose their shirts or 50% of their money like your describe 

Statistically show from the beginning of time the odds are heavily stack in your favor if you practice these principles over a long period of time...


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## tinhat

MARKETWINNER said:


> Even expert make mistakes. Nobody can win market all the times. Experienced players have edge over others. Stock markets look for future events.New players should learn as much as possible. Nobody can predict 100% correctly.




I agree.

As I have read tech/a say it is not about being wrong it is about how you respond to being wrong. Boggo and others here constantly throw up charts identifying not just a perceived potential entries (probability) but position sizes, initial stop losses (risk) and initial targets (probability).

The moment I understood (quite recently) that this game is about probability and risk management I changed my thinking. Now I've just got to change my behaviour (and learn and practice the required behaviour).

That said, in the long run (over thirty years plus) I am sure that an averaging in strategy into good growth and/or income stocks is going to do OK. But as we have seen in the past few years and as the historical charts demonstrate, there are decades where averaging into the blue chips or the index is going to get you nowhere.


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## tech/a

> Investors or Gamblers




I think ROE's statement encompasses 
Most which has been offered as " reasons "
By those replying.


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## sydboy007

biggest mistake to make - letting your buy price be an anchor.

Capital is to be protected.  Looses need to be minimised and wins need to be run hard.


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## Gringotts Bank

Van Tharp:  "You don't trade the markets, you trade your beliefs about the ,markets; and if your beliefs are not useful, you're in big trouble".


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## Trembling Hand

Gringotts Bank said:


> Van Tharp:  "You don't trade the markets, you trade your beliefs about the ,markets; and if your beliefs are not useful, you're in big trouble".




How do you use that in application GB?


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## Gringotts Bank

Trembling Hand said:


> How do you use that in application GB?




I have my own ways which you would laugh at.

Or Van Tharp has his methods outlined in http://www.amazon.com/Trading-Beyond-Matrix-Traders-Investors/dp/1118525663


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## Trembling Hand

Gringotts Bank said:


> I have my own ways which you would laugh at.
> 
> Or Van Tharp has his methods outlined in http://www.amazon.com/Trading-Beyond-Matrix-Traders-Investors/dp/1118525663




I'd hope you could give me the crash course. I don't read trading books.


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## Gringotts Bank

You don't read books.  How about mini books?  http://www.vantharp.com/matrix-mini-book-van-tharp.pdf


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## skc

Gringotts Bank said:


> Van Tharp:  "You don't trade the markets, you trade your beliefs about the ,markets; and if your beliefs are not useful, you're in big trouble".






Gringotts Bank said:


> I have my own ways which you would laugh at.
> 
> Or Van Tharp has his methods outlined in http://www.amazon.com/Trading-Beyond-Matrix-Traders-Investors/dp/1118525663




You don't apply knowledge in the trading books, you apply your beliefs about the knowledge in the trading books; and if your beliefs are not useful, you are in big trouble.

P.S. What Van Tharp *isn't *saying "Belief is all you need"


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## Trembling Hand

skc said:


> What Van Tharp *isn't *saying "Belief is all you need"




Here is something he is saying (pg 3) that I think I have heard before somewhere,,



> trading with no preparation can be as
> fatal to your account as an untrained surgeon would be to a patient
> or a bridge built by someone with no understanding of engineering
> would be to anyone with plans of crossing it.
> Thus, the first new rule is that trading is as much a profession
> as any other. It takes significant time (several years) and a deep
> commitment to become a successful trader. I hold a similar belief
> to author Malcolm Gladwell, who says that the best people in every
> field usually excel because they have successfully practiced their
> craft for well over 10,000 hours. And when it comes to trading, it ’s
> not just 10,000 hours of practice, because I ’ve defi nitely seen people
> who have put in 10,000 and learned very little.* I think that it ’s
> probably 10,000 hours of practice at doing it well.*


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## Gringotts Bank

skc said:


> You don't apply knowledge in the trading books, you apply your beliefs about the knowledge in the trading books; and if your beliefs are not useful, you are in big trouble.
> 
> P.S. What Van Tharp *isn't *saying "Belief is all you need"




He reckons beliefs and position sizing make up about 90% of the end result, whether good or bad.


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## Trembling Hand

Gringotts Bank said:


> He reckons beliefs and position sizing make up about 90% of the end result, whether good or bad.




Good luck with that religion. :


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## Trembling Hand

Gringotts Bank said:


> He reckons beliefs and position sizing make up about 90% of the end result, whether good or bad.




Hey GB if he reckons it takes 10,000 hour of "good practise" learning the craft of trading and thats only 10% of the journey how long does it take to learn the other 90%?


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## Knobby22

Trembling Hand said:


> Hey GB if he reckons it takes 10,000 hour of "good practise" learning the craft of trading and thats only 10% of the journey how long does it take to learn the other 90%?




So if you spend 9 till 5 every weekday for 31 weeks in a row on trading you will know only 10% of what you need to know? I think it would be more profitable to get a real job.


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## robusta

Knobby22 said:


> So if you spend 9 till 5 every weekday for 31 weeks in a row on trading you will know only 10% of what you need to know? I think it would be more profitable to get a real job.




Yep sounds way too difficult to me. Look to the long term at least there is a easier edge there.


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## Boggo

robusta said:


> Yep sounds way too difficult to me. Look to the long term at least there is a *easier* edge there.




Lets look at an example of that theory.

Market darling BHP is currently at the same price now that it was in June 2007.
Since then it has paid $5.84 per share in dividends.
Taking into account the dividend and CPI you would have achieved about 3.94% pa for six years on your investment.

I am aware that if you go back a further 6 years then you will capture the pre GFC and mining boom era but if you want to think long term starting now do you expect a repeat ?

Not saying that your theory is wrong, you are correct that it is easier but how effective for the future I have doubts about.

Just my


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## skc

robusta said:


> Yep sounds way too difficult to me. Look to the long term at least there is a easier edge there.




There is no easier edge. To be a successful investor you'd probably need 10000 hours of practice as well.

One key difference between short term trading and long term investing is that, long term investing has very slow and ill-defined feedback loop (borrowing Craft's terminology here). If someone made 25% on investing their shares, how much of that was due to the company's own performance vs the overall market?

I've done ~1500 trades in the last 12 months - that's might be 20 times more than an investor's entire investing life. If I don't have an edge, it will definitely show over 1500 trades. But if an investor picking 15-20 companies don't have an edge, he/she can wing it with some good luck or just with the overall rising market.

Investing may seem easier but it might be just a function of the relatively smaller sample size.



Knobby22 said:


> So if you spend 9 till 5 every weekday for 31 weeks in a row on trading you will know only 10% of what you need to know? I think it would be more profitable to get a real job.




Check your calculations...


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## So_Cynical

sydboy007 said:


> biggest mistake to make - letting your buy price be an anchor.
> 
> Capital is to be protected.  Looses need to be minimised and wins need to be run hard.




And yet loss of some sort is an absolute certainty, i think there are ways to minimise losses that don't include accepting them, as strange as that sounds.



Boggo said:


> Lets look at an example of that theory.
> 
> Market darling BHP is currently at the same price now that it was in June 2007.
> Since then it has paid $5.84 per share in dividends.
> Taking into account the dividend and CPI you would have achieved about 3.94% pa for six years on your investment.
> 
> I am aware that if you go back a further 6 years then you will capture the pre GFC and mining boom era but if you want to think long term starting now do you expect a repeat ?
> 
> Not saying that your theory is wrong, you are correct that it is easier but how effective for the future I have doubts about.
> 
> Just my




Lets expand on that example....chart show ample time after 2007 to profit, in fact a random sell point would be very likely to result in a profit and a stop loss once in 12% profit would guarantee it.
~


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## Zedd

Calliope said:


> Remember that every time you buy shares, the guy selling the shares is probably smarter than you.


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## burglar

TheUnknown said:


> I don't think i said something stupid did i ?




For you, it is the unknown, ...

but the talking duck, aka tech/a, knows a better way!


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## TheUnknown

burglar said:


> For you, it is the unknown, ...
> 
> but the talking duck, aka tech/a, knows a better way!





thanks for your


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## burglar

TheUnknown said:


> thanks for your




When a duck talks, I listen!


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## TheUnknown

burglar said:


> When a duck talks, I listen!





Cool story wannabe pro trader.


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## saundy69

Simple: Greed, greed, greed.

Greed attracts the masses to what looks like easy money. As we know, there is no such thing as easy money.

It takes $$$$$ worth of losses (read: lessons) before people realise its a methodical and structured approach, an approach that takes careful planning and execution. Finally, most people lack the discipline and that discipline is important! “If I just hold on it will come back, I can ignore my stop, it’ll come back.” Sounds like the words of a gambler....


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## cynic

TheUnknown said:


> Cool story wannabe pro trader.




Duck da dis' ! 
Don't dis' da duck!


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## Craton

saundy69 said:


> Simple: Greed, greed, greed.
> 
> <snip>





...and in response to the OP.

Fear AND greed are the usual suspects as to why these 'investors' lose out.

Fear of missing out, fear of being wrong, fear of losing it all are just a few reasons in the fear dept.

Greed, well the word says it all really and can play out in oh-so-many ways.

These two words describe emotions and once emotions get in the way of doing business (especially with money) things will go awry.

Also, losses aren't always a bad thing as these can be offset against gains thus could be seen as a tax ploy.


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## 13ugs13unny

Craton said:


> ... could be seen as a tax ploy.




Well thats one angle, most people lose money because for the some reason its the same people that like to pay 1/2 price specials at woolies, coles - then the same people go out and buy overpriced shares.

FOMO [fear of missing out} is a fear in the back of the mind the big rollers play on all the time.

When the market spikes like last few days..the smart ones are selling, and your left holding the monkey....seriously who really believes the markets generally will just keep going up and up forever FOMO?

Share trading longer term is like a locust plague, once it swarms comes in waves then a change in weather wipes them out.

If 100% of people were reasonable logical and intelligent there would be no market.


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## MARKETWINNER

tinhat said:


> I agree.
> 
> As I have read tech/a say it is not about being wrong it is about how you respond to being wrong. Boggo and others here constantly throw up charts identifying not just a perceived potential entries (probability) but position sizes, initial stop losses (risk) and initial targets (probability).
> 
> The moment I understood (quite recently) that this game is about probability and risk management I changed my thinking. Now I've just got to change my behaviour (and learn and practice the required behaviour).
> 
> That said, in the long run (over thirty years plus) I am sure that an averaging in strategy into good growth and/or income stocks is going to do OK. But as we have seen in the past few years and as the historical charts demonstrate, there are decades where averaging into the blue chips or the index is going to get you nowhere.




I like your following ideas.

The moment I understood (quite recently) that this game is about probability and risk management I changed my thinking. Now I've just got to change my behaviour (and learn and practice the required behaviour).

When we pick stocks two of the important factors to consider are Margin of safety and risk management.


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## Trading Tools

I believe many new traders can easily get caught in the trap of focusing more on their winning percentage (accuracy) or entry setups, rather than having a balanced approach to their overall trading system, thereby limiting their trading success. There are many aspects to successful trading which are equally important and must not be neglected, including risk/reward ratio, trade management, money management, etc.

Another critical, yet often overlooked aspect is, *knowing the system you’re trading actually has a positive edge/positive expectancy over a large number of trades*. Expectancy ($ per trade) = (Win% x Ave Win) – (Loss% x Ave Loss)

Remember trading is an odds-based endeavour and traders are continually challenged by the prospect of making decisions in the face of uncertainty. As a trader, we must therefore place our trades based on a trading plan/system which has a proven edge (positive expectancy) over a large number of trades and we must learn to think in terms of probabilities.

If your trading plan does not show clear positive expectancy then no amount of trading psychology, or anything else for that matter, will help in the long run. 

_Trade ONLY when you have an identifiable, proven positive edge!_

Cheers


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## Craton

Trading Tools reminds me that I guess too that there is the difference between the trader that actively trades equities and the investor that is parking excess funds. Both can lose or win and both would have a different strategy for exits.

How they cope or deal with RISK and their TIME perspective will have a lot to do with the loss equation as well.


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## Wysiwyg

Maybe because we approach the market too logically. We expect something to happen and it doesn't and I wonder if that is *by design*? You see, when the exodus or exuberance is over, the trend reverses. People have bought near the unknown top and sold near the unknown bottom. Squeezing participants out of or into the market.


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## joshwelsh

Elliot said:


> I am wondering how do individuals lose money in the stock market?. Do they fail because of there lack of knowledge in Economics, Finance and Sharing Trading and TA Software ?. Do they just see $$$$ signs everywhere and splash there cash around hoping on luck ?. I mean how do some investors fail in investing there money successfully in the stock market?.
> 
> All I hear in regards to the stock exchange people losing money I even know people who have halved there investment money in the stock exchange when trading shares. I hear that its a system made to lose money rather then make money?.
> 
> Are there any well written share trading books with strategies that can atleast some what help reduce your risk of losing all your investment money in the shares?
> 
> Thanks




because people get conned into thinking they can become a proficient trader because they have a fancy platform with lots of lines on it without understanding the macro and micro economic factors that drive stock market returns, they also think they can day trade and dictate to the market how they are going to trade.

i personally would recommend Investments By Zvi Bodie it will give you a great understanding from the top to the bottom of what actually drives stock market returns and how to capitalize on value chain shocks and events around the world.


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## AlterEgo

joshwelsh said:


> because people get conned into thinking they can become a proficient trader because they have a fancy platform with lots of lines on it without understanding the macro and micro economic factors that drive stock market returns, they also think they can day trade and dictate to the market how they are going to trade.
> 
> i personally would recommend Investments By Zvi Bodie it will give you a great understanding from the top to the bottom of what actually drives stock market returns and how to capitalize on value chain shocks and events around the world.




You can trade quite profitably without any understanding of economic factors though. In fact, without even knowing anything about the companies that you are trading. You can just trade on the price action by itself.

The reasons I think most lose money is;

1. Most people have not formulated any sort of plan.

2. If they do have a plan, they have not tested the plan to see if it has any chance of making money. They just believe it will work because some stock guru said it will. They haven't actually tested it themselves.

3. Emotions. Most people will deviate from the plan once their emotions get involved.


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## tech/a

There is only one REASON people lose money trading.

*They get on the wrong side of the market
More often or longer than they are on the right side*

There are endless reasons why they get there and or remain there.

Get on the right side of *ANY TRADE* and stay there more often or longer 
Than your not and you'll profit.

It's not that complicated!


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## SuperGlue

Because people are not afraid of loosing but afraid of winning.

Example, when on a loosing trade, trade becomes a long term investment, so lost gets bigger.

But when on a winning trade, better take profit now, so profit is small.


Ask anyone who trades (except for a few season traders):

what if you make a lost, will keep it for long term, it will bounce up - has a long term plan
what if you make a profit, take proft - has a short term plan.

I confess, I do occasionally fall into the above trap.


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## Weatsop

You can't pick the bottom.

You think you can.

But you can't.


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## tech/a

Weatsop said:


> You can't pick the bottom.
> 
> You think you can.
> 
> But you can't.




You don't have to.


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## Weatsop

tech/a said:


> You don't have to.




No, I know! But you see so many people buy something that's tanking, thinking they're getting a bargain, without knowing a thing about the fundamentals. They just assume it can only go up from here.

Human nature is not your friend!


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## tech/a

Weatsop said:


> No, I know! But you see so many people buy something that's tanking, thinking they're getting a bargain, without knowing a thing about the fundamentals. They just assume it can only go up from here.
> 
> *Human nature is not your friend!*





Oh it certainly is mine !!


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## Weatsop

tech/a said:


> [/b]
> 
> Oh it certainly is mine !!




Because you're the feller at the other end of the trade?


I heard my uncle proudly talking about his strategy of selling half his shares if they go into profit, because, I guess, risking 100% of your money but only letting 50% of it ride the good trades is a great idea.


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## tech/a

I don't trade fundamentals
I trade crowd behavior.


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## dlineinvestor

Not educating and not fully understanding the risk.
Not many realise it takes ... give or take 10 years to understand and overcome.


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## JamesP

My Father bought Telstra shares in 1999 when he worked there, I asked him why and he said "dotcom". I asked him what that meant and he said no idea. Then Flinders mining at 12 cents, went up to 30 cents and some stupid woman ruined the deal (it became to publicized) and they're now around 2 cents (he's still holding accepting they're worthless). 

I would've imagined losing on the stock-market would be more common than not losing? Most these planned publicized deals appear to flip overnight after predicting a boom... insiders/minority robbing the mass shareholders?? Every time they market the flock towards a highly publicized deal, or a boom, the opposite happens!!!


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## edman79

Its interesting to see that no one has mentioned that it is just as hard to lose money (before commissions) as it is to make money. When backtesting a strategy if it failed spectacularly we could just reverse the long for short signals or vice versa. Most non buy and hold trading strategies you backtest over the long term will come out neutral (after commissions), they often rely heavily on market conditions. If there was a way of quantifying why people lose on the market then you could use that as a guide for success.


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## tech/a

edman79 said:


> Its interesting to see that no one has mentioned that it is just as hard to lose money (before commissions) as it is to make money. When backtesting a strategy if it failed spectacularly we could just reverse the long for short signals or vice versa. Most non buy and hold trading strategies you backtest over the long term will come out neutral (after commissions), they often rely heavily on market conditions. If there was a way of quantifying why people lose on the market then you could use that as a guide for success.




Sounds fair enough in theory.
But in practice simply reversing a losing method won't guarantee a profitable method.
It not like slamming a car in reverse.
I'd arue it's far easier to lose money.
I disagree that most trading methods tested over the long term return a neutral result.
If they do then you need to understand system design.

There is certainly ways of quantifying why people lose regularly in the markets.
And yes we can and do use it!


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## edman79

tech/a said:


> Sounds fair enough in theory.
> But in practice simply reversing a losing method won't guarantee a profitable method.



can you explain this?



tech/a said:


> I disagree that most trading methods tested over the long term return a neutral result.



 I considered this before I wrote it but most = >50% (a bit vague I know) but I would put it at substantially higher than that, and I also wrote "non buy and hold trading strategies" attempting to take out the long term directional bias of the market.


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## Jens

dlineinvestor said:


> Not educating and not fully understanding the risk.
> Not many realise it takes ... give or take 10 years to understand and overcome.




TOTALLY agree!


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## tech/a

edman79 said:


> can you explain this?




Sorry just seen this.
Lets take a moving Average x over. The main reason these fail (M/A Systems as an example) aren't the syntax (formula) and the variables but that they get whipsawed. Reversing the exit to a short entry wont give you a profit. That's not what's causing the loss in the first place.



> I considered this before I wrote it but most = >50% (a bit vague I know) but I would put it at substantially higher than that, and I also wrote "non buy and hold trading strategies" attempting to take out the long term directional bias of the market.




I would argue that with out a knowledge of how to skew a formula toward profit you would have a much higher rate.
But once you know how to skew it you will get a much lower rate.
Infact the challenge becomes developing a method which returns greater than the market---and when you get really good at it---returning over 20%

From my experience


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## dlineinvestor

Here is something, my thoughts anyway "we can ask the question why do ppl lose money in the stock market.
The real question is "how can "I start to make money in the stock market.

 ... Does your trading show profit or loss ? There are many that show profit but are still not happy. I've heard of a trader making 10 million a year that still wasn't happy, he said he wanted more like the big boys. (he did eventually after counsel (this is another story)

So if your not ... what are you going to do about it?
(I'm trying to be thought provoking here not putting anyone down that isn't profitable)
The message here is anyone not making money needs to learn from someone that is making money. Doing it alone can be done, but it can take several years longer. 
Basically if you don't change anything now don't expect anything to change in the future.
Tough love but success stories do exist in "making money in the stock market


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