Why 90% of retail investors lose money in stock market ?

Why 90% of retail investors lose money in the stock market?



Why 90% of retail investors lose money

Why it is difficult to earn money in trading?

  1. If you want to set up a new business you research about your competitor, you search for the winners and losers, hows the industry works, how do I succeed in this industry, what mistake do I need to avoid. If you are going to any industry as a businessman you research it but why you are not doing this research about trading. Retail trader jumps into trading without any business knowledge.
  2. Technology has significantly increased the participation of retail traders
  3. Volatility in the stock market is decreased after the 2009 stock market crash. What is that mean for traders? Volatility is the lifeline for the traders because without volatility you don't have any risk and any reward. Risk and reward are the two sides of the same coin. If volatility has decreased the risk and reward also get decreased also returns after a certain time period gets to zero. So why stock market volatility gets decreased?
  4. Get yourself into the volatile market if you are a trader
  5. Try different instruments like a commodity - stocks-options
  6. There are two main reasons for the decrease in volatility in the stock market
  7. Technology: Retail traders can no longer rely on day trading or scalping technique in the hope of making quick and easy money. Algo trading has taken over and always beat the human over a short time horizon.
  8. Participation: More participation = more liquidity = less volatility =less opportunity to make money
  9. Due to these two reasons, day traders lose money because they enter into a less volatile market. If the market is not volatile how can you make money 
  10. Because the market is not the volatile market is in the same position after one year and dedicating the brokerage for buying and selling you are actually losing money.

The 90/90/90 Phenomenon

  1. It says 90% of the retail traders lose their 90% capital within 90 days.
  2. The broker provides you the leverage  of 40x 
  3. If you lose 2.5% with leverage you will blow your account by 100% in a single day.
  4. What if the broker takes the opposite side of your trade
  5. The broker always wins with 90% success ratio.
  6. Your objective is to make money but the broker objective is to take your money
  7. The infrastructure is built not for your benefit. It is built for the broker benefit

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