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Why Most Retail Traders Fail And How To Avoid It 

Last Updated: March 21, 2022

By Rayner Teo


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In this episode, you’ll discover the reasons why most retail traders fail and how you can avoid falling into that same pit.

So listen to it right now…


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What Do All Successful Traders Have In Common? 


Hey, hey, what’s up my friends?

Welcome back to today’s episode where I’ll be discussing why most retail traders fail and how you can avoid that. There are a few reasons for this, but I would say these are the core reasons and if you can avoid them, you’ll be much closer to becoming a profitable trader.

Of course, I can’t guarantee you’re gonna make millions of dollars and live off the beach in Hawaii sipping a pina colada. But hey, we can get you closer to that goal.

Mistake #1: You simply dabble in trading

As a retail trader, you have to go all, you cannot just dabble in trading. What do I mean by dabble? You can’t be like:

“Oh let me try forex trading I heard it’s easy to make money 10 pips a day.”

“Let me try options trading! I heard that the call option is something that you can risk $1 to make $5.”

“Let me try doing spreads!”

You can’t “try”. The word “try” cannot be in your dictionary. As a trader, the word “try” is out. You must use the word “must”.

I must succeed in trading, I must do whatever it takes to become a profitable trader, I must do the work and validate my trading strategy, I must be prepared to make sacrifices along the way. You must. And that’s the attitude of a winning trader.

Use the word “must”, not “try”, not “could”, not “wish”, not “will”, not “could have”, not “nice to have”. No, those are vocabulary that will hurt you as a trader, you must do it. You can’t just dabble in trading – you have to make trading a must.

Mistake #2: You fool around with the indicators

Many traders fool around with indicators because it’s sexy, “Look at those lines Rayner, it goes up and down, it’s so fun! The pink line, the blue line, the black line.”

And here’s the thing about indicators, a lot of retail traders think:

“If I find the right permutation of indicators, I can make money from the markets.”

“If only I knew the right combination.”

“If only I know the right choice of indicators to use.”

But here’s the thing, there’s no magical formula or permutation for indicators out there. You might found a set of indicators with a fixed set of parameters worked over the last 3 months. But guess what?

That worked because of a specific market condition, but market conditions change. And when market conditions change, that fixed set of indicators that you’re using is not gonna work.

That’s why don’t focus on finding the combination of tools or techniques to trade the markets as it will expire eventually. Instead, what’s important is to learn how to read the price action of the markets.

It’s as simple as this:

  • If the market is in an uptrend, then look for buying opportunities
  • If the market is in a downtrend, then look for selling opportunities

That’s pretty much a very simple framework that you can start with. Ask yourself what the market is doing and where can I find trading opportunities to trade in this current market condition instead of finding the best permutation or the best settings.

That will get you nowhere. Instead, learn how to read the price.


Mistake #3: You don’t have a consistent set of actions

Most retail traders are always dabbling or trying new stuff. One moment they’re doing price action trading, another moment they’re doing chart patterns, next moment they’ll do Elliott Wave, next moment is indicators, and the next moment is harmonic trading or whatsoever.

When you are all over the place, when your actions are inconsistent, when you’re doing everything and anything, your results will be inconsistent.

I get it, at the start you’re excited to explore as much as possible about trading with all the different tools or techniques, the indicators, the pattern. I know, fair enough, go and explore.

But eventually, you must reach a stage where you have to discard 90% of the tools out there because it’s irrelevant to your trading methodology. You have to be willing to cut out the noise.

If you’re not willing to cut off the noise and are still dabbling in everything and anything, then your results will never be consistent.

One of the sentences that hit me hard is that to be a consistent trader, you must have a consistent set of actions, no two ways about it.

Mistake #4: You don’t have an edge in the market

Most retail traders that fail don’t have an edge in the market because they take it too lightly.

They think that as long as they have a minimum of a 1:2 risk-reward ratio, as long as they have discipline, as long as they have risk management, they’ll make money in the markets. Well, guess what? No.

You must have an edge in the markets. You must have a strategy, a methodology, a system, that whenever you execute it, in the long run, it gives you a positive expectancy.

Let me explain. Imagine you have a coin in your hand. Every time the coin comes up heads, you make $2 and every time the coin comes up tails you lose $1. 50% of the time it comes up heads and 50% of the time it comes up tails.

Now let me ask you, in the long run when you toss that coin, will you make money? Well, it’s pretty obvious that you’ll make money.

But what if every time you toss a coin, when it comes up heads you lose $2 if it comes up tails you make $1? Can you see that in the long run, you lose money, irrespective of the best risk management, or trading psychology?

Those don’t matter if you don’t have an edge in the markets. Nothing else matters. As a retail trader, I find that it’s important to explore and extract your edge out there.

There are tools out there to make your life easier like backtesting platforms, trading journals, or even books that share with you trading strategies with backtested results.

You can just copy that strategy, tweak it to your needs, test it and see whether it works. These tools make your life easier, but you have to be willing to look for them. No one is going to do it for you.

You have to be willing to do the work. And that’s why if you trade, it’s a must for you to succeed and you’ll have to do whatever it takes. But if you simply dabble in this or dabble in that then nothing’s gonna change. You’ll still be a losing trader.

And finally…

Mistake #5: You have the wrong expectations about trading

There are many marketing messages out there which say, “Oh, just do this and you’ll make money with just 10 pips a day. You can make 200 pips a month consistently.”

But really, you shouldn’t look at trading as something that gives you a fixed return consistently, every single day, every single week, every single month, because that’s not how it works.

If you want something fixed or consistent, get a job – not trading and nor doing business, because there’s risk involved.

The market is always changing and it takes time for your strategy to either adapt to the current market condition or to play defence until the market condition comes back to be in your favour and then the strategy starts making money again.

That’s the reality of trading. If you don’t manage your expectations, if you think trading is something like an ATM which prints money, then you’re in the wrong business.

So, manage your expectations. Don’t think that you can just take a weekend seminar or online course, and then within a couple of months, make money from trading. Yes, you could have beginner’s luck.

But after a while, if you don’t know what you’re doing, you don’t respect the risk that is involved, you will lose everything and more. So, manage your expectations. This is important.

With that said, those pretty much sums up what I feel about why most traders fail and hopefully those help you to reduce your learning curve along the way.

That’s it. I wish you good luck and good trading, and until next time.

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