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FSP Insight Articles10 main reasons why new traders lose money

10 main reasons why new traders lose money


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Have you ever wondered why new traders lose money? Day trading is a high-risk, high-reward activity that requires discipline, patience, and a deep understanding of the markets. Unfortunately, many new traders lose money in their first six months because they lack the knowledge, experience, and emotional control necessary to succeed. There is nothing wrong with being ambitious and excited when first getting into the day trading/forex trading world. However, there are things that newbie traders should understand before diving head-first into the markets. Here are the 10 main reasons why new traders lose money:

10 Reasons why new traders lose money

Lack of a Trading Plan

Many new traders enter the market without a clear trading plan, which leads to impulsive and emotional decisions. A trading plan should include a set of rules for entering and exiting trades, as well as a risk management strategy. Building a trading plan takes time and sometimes, the best trading plan is built through all our previous failures.

Insufficient Capital

Day trading requires a significant amount of capital to be successful. New traders often underestimate the amount of capital they need to start trading and end up risking too much of their account on each trade. There are other ways for consistently profitable traders to get their hands on a sufficient size of capital. i.e., Prop firms and private investment. If you can prove that your equity curve rises over time, then the money will find you. Don’t worry about the capital in your first six months. Focus on becoming consistently profitable.

Lack of Patience

Day trading requires patience and discipline. New traders often make impulsive decisions based on short-term market fluctuations and end up taking losses. Learning patience in the markets comes from time spent in the markets. Once you have a trading plan and strategy in use, your lack of patience won’t be an issue because you will understand when and how to get in and out of the markets.

Overemphasis on Short-Term Results

Day trading is a long-term game, and new traders often focus too much on short-term results. This can lead to emotional decision-making and a lack of consistency in their trading. When you start your trading journey, you won’t know if you’re better at scalping or swing trading. This will all get revealed to you in time. Trading should fit in with your lifestyle, personality traits, and available time that you have free to spend in front of the charts.


New traders often use too much leverage, which can lead to large losses if the market moves against them. It is important to use leverage wisely and to always have a plan for managing risk. New traders often feel that if they see a great setup on the charts, they should risk a lot more than their trading plan says they should because they become excited at the prospect of making a lot of money in a short period. Unfortunately, therefore many new traders will blow their accounts quickly.

Lack of Education

Day trading is a complex activity that requires a deep understanding of the markets. New traders often lack the education and knowledge necessary to succeed, leading to poor decision-making and losses. For example, The first thing that new traders will learn about is support and resistance. Many newbie traders will skip this. Learning to trade requires time and dedication. It is the same with any new skill. You cannot start trading in January and become profitable in February. One needs to think of it as getting a college degree or building a business. It takes time, practice, the ability to learn how to fail and keep pushing forward, and a lot of passion.

Failure to Follow the Rules

Day trading requires discipline and consistency. New traders often fail to follow their own rules and end up taking losses. This one is important. You have a trading plan for a reason. You spent time and effort building this trading plan to suit your lifestyle, available time, and personality traits. Why would you go against the rules? If you know the rules are there to keep you profitable, it would be poor judgment to change them.

Lack of Emotional Control

Day trading can be an emotional rollercoaster. New traders often lack the emotional control necessary to remain calm and level-headed during market fluctuations. With time, you will learn that trading based on your emotions is a one-way ticket to a blown-up account. The markets do not care about what emotional state you are in. One cannot be emotional whilst trading.

It should be treated as a professional business. Losses are just as important as wins. Consistency is key. Emotions do not matter when it comes to trading. Over time, you will learn how to trade in a carefree state of time and with zero fear. Once you have control over your emotions, you won’t be at risk of making any mistakes and therefore consistent profits will flow whilst trading from this state of mind.

No stop-loss

A stop-loss is a risk management strategy that helps traders minimize their losses by automatically selling a security when it reaches a certain price. New traders often fail to implement stop-losses and end up taking large losses when the market moves against them.

This purely comes down to experience. Often newbie traders will refuse to put a stop loss in their position. Once this happens and the trade moves into draw down against them, then they will believe that the position will turn around, and therefore they won’t ‘need’ to put in a stop loss. Failing to put a stop loss in can result in exponential losses on their account. One bad trade can result in margin calls and end up blowing the entire account.

Not having a proper exit strategy

A good exit strategy is as important as a good entry strategy. New traders often fail to have a plan for exiting trades and end up holding losing positions for too long. With time, you will figure out what is best for you. You will learn how and when to exit a position. Knowing when to get out of the markets is just as important as knowing when to get in. Once you know when and how to exit, it should be stipulated in your trading strategy to follow for all possible future trades.


In conclusion, day trading is a challenging and complex activity that requires knowledge, patience, and emotional control. New traders often lose money in their first six months because they lack the discipline and knowledge necessary to succeed. To avoid these common mistakes, new traders should develop a trading plan, use leverage wisely, and continuously educate themselves about the markets. It is also important to set stop-losses and have a proper exit strategy

Disclaimer: The FSP probability score is derived from adding and subtracting the positive and negative aspects of the position and is not a definitive sign of how the trade will play out. FSP is not in any way a financial advisor

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