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percent of retail day traders are losing money, who is making all that money? The institutional day traders are making it, that's who! |
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Individual day traders have their work cut out for them if they think they can compete successfully on a long-term basis against the likes of Goldman Sachs, Morgan Stanley, and the other large players or even smaller firms made up of seasoned professionals. |
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The fact that the odds are against retail day traders is not likely to stop growing numbers from trying. Only a significant and prolonged market slump would cut down the numbers of traders. And even then, as soon as the market recovered, many would return to try again. |
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Fear-Based Trading Errors |
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The following few errors are made primarily out of fear. While lack of investment sophistication and personality traits may enter the picture with these issues, it is fear that is most prominent in causing the problem. |
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Too much analysis before buying. For some online investors, especially among the obsessive-disciplined and doubter-timid types, the basic fear of committing funds to the market is the first hurdle that is tough to clear. |
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The fear of being wrong is exhibited through procrastination. Too much analysis may be displayed as the need for just one more piece of information, one more trial period to track the stock on paper, one more earnings report, or anything else that may be used to put off committing to purchase the stock. |
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This felt need for more information may be played out indefinitely on the Internet, where there are so many online stock sites that offer detailed company analysis and commentary. |
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Procrastination often has a way of backfiring: It ends up leading to exactly the assessment of having made a mistake that investors are most trying to avoid. This occurs because investors wait too long and miss the greater amount of upside movement of a stock. |
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If they buy toward the top of a run-up, they are often disappointed when they don't make the profit they hoped for. And, unfortunately, this tends to reinforce their thinking that they don't have good judgment in terms of when to buy a stock. For those who repeatedly notice that they enter a position too late, this fear of commitment to a position is often operating. |
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