10 Reasons Why You're NOT Making Money Day Trading (2024)
Kardec Trader breaks down ten reasons day traders lose money: skipping real trading, lacking a backtested edge, jumping between strategies, poor discipline, unrealistic goals, no trade journal, ignoring psychology, and weak risk management. Education alone won't work without a personal system you've tested and the patience to stick with it.
Chapters
Making money as a trader is one of the most difficult things to do in my opinion. Traders usually have a difficult time keeping the money or making money in general. In this video, I want to tackle some of the reasons traders are unprofitable and ways to tackle it. With that being said, let's dive into it. The first main reason I believe traders have a difficult time making money is they have no idea what they're doing. Now you can expect yourself to dive into the markets or dive into anything in general and just be good at it. You have to understand it takes time and you need real education to understand how the market works, how to trade and actually put on the real trades. A lot of traders think when they take education, when they watch videos, when they consume information, they will magically become a good trader. Learning is one part. Most of the learning, the most of the experience comes from actual trading, when you're actually on the battlefield, when you're actually putting on trades. So if you have the education component down and let's say that's checked off and you have the good education, good foundation, that's one piece of it. The second piece of it is you putting on real trades. Most traders miss that part out. They think, hey, I've learned a certain strategy or I've learned how to trade the markets and now I should be ready to go take that with a grain of salt. Just by understanding that if you have the education, cool, now you have to apply it, which is the most difficult part in my opinion. So if you got the education component down and now you're going into the applying part, these are some things I would recommend you to do. Number one, off with paper trading. But also keep in mind that paper trading is good for a certain period of time, just to understand and get a feel of the markets, get a feel of the platform. But paper trading itself is not real trading. Like, it will not allow you to take the information you've learned and apply it to the real markets because your emotions and your mental blocks are not involved. Once you have the education component down, then maybe you've paper traded. Go and apply these methods to the real market and see if it's working. And if you don't want to apply it with real money, you can always go and backtest. The next reason why a lot of traders have a hard time being profitable is they have no real edge. As a trader, you need to have an edge in the markets. You need to understand what strategy you are going to trade, what strategies. Maybe you're going to Trade well, what your approach to the market is. And you have to make sure these strategies or strategy is backtested. It is proven that it has a good success rate. Your job as a trader is to identify strategies that fit within yourself, that fit within your personality, right? So I've seen traders that try to scalp and they don't have the personality to maybe be a scalper or to be quick on their feet. They go into the markets, they replicate strategies from other people that see on YouTube, Instagram, Twitter, and they're like, I want to trade exactly how this person trades. It's a good approach of learning and understanding. But if you want to really excel, you have to take bits and bits of pieces from other traders, understand what they're trading, how they're trading, and then kind of build your own playbook and understand that, hey, this is my personal approach to the market. This is my personal way of approaching things in general. And this is my personality. And based on my personality, these are the trading methods that I think fit best with me. And this is the edge or this is the approach, approach I want to take on the market. I see a lot of traders when they put on trades, it's all random there. There's no consistency of the trade idea, there's no consistency of the trade execution, and there's no consistency of just a trade in general. If you have that kind of randomness in your trading, you don't have the real edge. This will make it very hard for you to scale your trading, go to the next level, or even just be profitable in general. Strategy hopping is the next reason that some traders have a very hard time in being profitable. Now, I see traders that have a good understanding of the markets, they have a good understanding of what they're trading, they have an edge. But whenever their strategy or edge stops working, which is normal, by the way, in the markets, they immediately abandon that strategy. They go, okay, well, this strategy has been working, or my approach has been working for two months or a month now. For one week it stopped working. I need to jump ship and go and find a new strategy. Now, the problem with this is traders don't understand that their strategy will work well under certain market conditions and some other market conditions. The strategy will have a completely difficult time in evolving, right, or excelling. So when you have these strategies outlined and you have your criteria and you have your full idea of the strategies, you need to understand what market conditions are these strategies viable for? Maybe they're viable for all market conditions. What approach do I have to Change in my trading, if the market gets flat, if the market starts to range bounding, if, if the market is accelerating, if we have gap up or gap down days, what do I need to change? Do I need to hold onto the strategy during these moments or can I adapt to the market? So if you do have a strategy that has proven some result, do not abandon it the moment it stops working. Instead, understand why it's not working. Maybe it's you, you're just putting on bad trades. Maybe it's the market that suggested or maybe sometimes the strategy was never really a real strategy and you, we're just getting lucky. That could also be it, right? But it's your job to identify which one it is and actually put in the time and effort to understand these components. No discipline and no patience. I see traders all the time that have a good strategy, that have good risk management, that have everything on like the technical side down. But when it comes to them personally, they have no discipline on following their plan, no discipline on executing what they said they were going to execute, no patience on like waiting for their trades to formulate or their trade setups to come to them. These people wake up, rush to put on trades, rush to make money. And this ultimately, you know, is more of a personal problem than it is a trading problem, in my opinion. So their personal problems, their personal issues usually bleed into trading. So I always say a person cannot be disciplined in trading and not be disciplined in their personal life and vice versa. You can't be disciplined in one part and not disciplined in the other part. Either you are naturally, you've developed yourself to be disciplined. You've developed yourself to, you know, have patience or have parameters to develop these things or you will not be able to achieve it in trading. So for example, let's just say in your personal life you say, hey, I'm going to go to the gym, I'm going to do what I say I'm going to do. And when it comes to, you know, in your personal life, when it comes to these things, you don't do it. What do you think is going to happen when you're trading? And immediately when you put on a trade, you're like, well, I'm going to follow my stop. I'm going to put this position on. I'm going to wait until, you know, 10:00am, I'm going to wait for the 10 minute candle to formulate. I'm going to actually follow my game plan. What do you think is going to happen? The same thing that happens in your personal Life, which is you won't follow your plan, you won't listen to yourself. So if you're having a hard time being disciplined or being patient right in your trading, go outside of your trading first. Develop this in your personal life. Be disciplined in all aspects of your life. If you say you're going to go to the gym at a certain time, make that a natural habit every single day, hey, I've committed to doing this and I will make sure I keep moving forward by doing this. And when you do that in your personal life, you'll start noticing it transitions into your trading. And in trading you need extreme amounts of discipline and extreme amount of patience, right? Because most of trading is you waiting for setups. It's not you putting trades on all the time. Most of trading is you waiting, you sitting in your hand and you waiting for the right opportunity to come. And you as a trader being able to recognize this opportunity and execute upon the opportunity. And that is your job as a trader. That's what we get paid to do. We get paid to recognize opportunities and execute on it. Not sit in front of a computer for 10 hours and just put random trades that have no consistency or no edge behind them. If you are having a hard time with being disciplined or being patient, develop that on the outside of your trading first and then you will see it slowly transition into your trading tight time horizon. I see traders always, when they enter the market, they give themselves like a one month window or two month window or a three month window saying, hey, I have this short period of time to achieve profitability or consistency as a trader. And this usually creates very tough pressure for traders. And we as traders, we don't need to make our job more stressful, we don't need to add more pressure. So when we give ourselves this tight horizon, we naturally just make it more difficult for ourselves. Like why are we making something that shouldn't be as difficult difficult for us for no reason, you're starting out or you're having a difficult time trading, get rid of the I need to be profitable in one month, I need to be profitable in two years, go and flip it and say, you know what, I'm going to give myself two years and I'm going to give myself proper two years of focusing on the market, focusing on what I need to do. And in those two years, or let's just say one year, I'm not focused on making money, I'm not focused on being profitable, I'm focused on becoming a better trader. I'm focused on these following things. I'm focused on identifying an edge, focused on identifying what works for me. I'm focused on understanding and learning about the marketplace as much as I can, learning more about myself. What works for me. How do I respond to a losing day? How do I respond to a winning day? How do I respond to my stop losses? How do I respond when the price starts rallying and I have fomo? How do I naturally respond? So my goal is to understand these things. Year one instead of year one I want to try to make money or year one I want to make X amount of money. That should not be the goal. And I see when traders get create that pressure for themselves, they have a really, really difficult time and being profitable or even just staying alive because that pressure builds and it makes them put on trades or force trades or take trades that they shouldn't really be taking, not tracking their trade. So a lot of traders enter the market and they have no understanding of their data, they have no understanding of what they trade, what they do well and what works, what doesn't work right. So I'm a big believer on treating trading like a business. Now if you have a business, what is one thing that you as a business owner should do? You should be tracking your expenses, tracking what in the business is going well, what in the business is going bad. Now most traders when they start out trading, they do not focus on this. They do not focus on keeping a journal, they do not focus on analyzing, tracking their trades. They immediately go open an account and randomly put on trades. This is very easy and okay to do, I guess. But this will not allow you to evolve as a trader. If you want to evolve as a trader, you need to understand all your metrics, you need to understand what are areas in your trading that you are struggling with, that you are having a very difficult time with. The way to do that in my opinion is to track trades, track every single trade you take, understand what was your stop loss, what was your multiple on the trade, why did you enter the trade, why did you exit the trade, track your days, look at your pre market game plan, what you actually did during the day, and then break down what the outcome of that day was. And I can make another video and just tracking and journaling your trade. So if you guys want me to make that, just comment down below, let me know if that is something you want me to go in depth about. But just to be on the topic really quick, make sure you guys are tracking your trades, you guys are analyzing your trades, you guys are understanding Your flaws, understanding what is working. You're tracking your, your strategies, you're tracking your mistakes. You're tracking, you know what is working, what isn't working. You're tracking your position, sizing and all of these things. Because it's extremely important for you as a trader to understand, hey, what is causing me to lose money? Where am I making money? Well, when I'm making money, am I leaving money on the table? What is causing me to sell too early? Am I actually following my stop loss? Do I actually have a good stop loss? Does my stop loss make sense? Meaning if I put my stop loss and the trade hits my stop loss, does the trade keep going lower or does it reverse for my stop loss area? And the only way you will learn these things is if you track and journal and analyze your trades. Understanding their trading psychology Every trader is different. You and I, we're both different. We think differently, we operate differently, we all have different personalities. So when we get exposed to trading, we will be exposed to different problems. We will both also react to different problems. Our job as traders is once again to understand why, what is our mental blocks. What are things that are impacting our trading from a personal psychological level? So I'll give you guys a really quick example. I know traders that have a really hard time following their stop. Now the reason they have a hard time following their stop is because they don't want to lose money, they don't want to be wrong. Or every time a trade goes close to their stop, they're immediately like, oh well, this will go higher. Then I have other traders that have a really, really easy time on following their stop, but they have a terrible time sitting on their hands or being patient or not letting a trade formulate the way it's supposed to formulate. Your job as a trader is to identify what problems pop up into your trading, right? What type of psychological problems pop up into your trading and how can you create a system to tackle these problems? You can't just identify problems and say, well, these are problems I have. Okay, well great. Identifying is one part. But how do you identify? Build a system that helps you tackle these problems and make sure you as a trader in your long term career are making sure you're tackling these problems, you're on top of them and you're aware of how you respond to each and every single problem. I've seen the mental part of trading where traders ultimately have destroyed their trading because of mental psychological issues that blood into trading. So trading psychology is extremely important of understanding, identifying and then fixing the problems. Up until you get these parts out, you won't have real success in trading. And like I said, one key thing to help with this is, like I mentioned before, track your trades and also track your thoughts, track your emotions, understand what is working, what is not working, and just get a good idea of yourself and a good idea of what is working and what is not working. Having unrealistic expectations. So this kind of goes hand in hand with what I mentioned before. When you have a tight time horizon, unrealistic expectation kind of sets the bar very high. And not saying you shouldn't set the bar very high, but it's like starting out once again, that adds a lot of stress to your trading, right? Where, okay, well, I need to make a hundred thousand dollars my first year. I need to make $200,000 in my first year, Whatever the case is. Those unrealistic expectations that you set monthly, weekly, yearly just create a level of stress for your trading. And I think as traders, we don't need that. We don't need to add more stress to ourselves. So your expectations or your goal setting, if you want to, if you want to really call it, which is another problem, setting goals and having these expectations should be more geared towards identifying problems and small wins. So for example, if you are able to identify what strategy is making you the most money, that is a small win. If you can identify what is causing you to lose the most amount of money, that is a good small win, right? If you can identify some of the mental blocks or the psychological problems that are bleeding into your trading, that is a small win. If you can create a system to tackle those problems, that is also a small win. So start focusing on small wins. Start focusing on that part instead of your P and L, right? Because your P and L or your profits will not reflect right away. You start today as a trader and let's say in six months you're able to identify or get these small wins. Imagine where you'll be in terms of knowledge, in terms of understanding yourself, in terms of understanding the market, in terms of execution and all of these things. And then imagine when you start compounding this, another six months where you could be in a year opposed to, well, in six months I need to make $100,000 or in a year I need to make, I need to make a million dollars. These things just, they just make it very difficult for yourself. And, and I don't want you guys to make trading more complicated or more difficult than it is. Ease it up, make it more comfortable. Make it more concise and just focus on the small wins. Get rid of the time horizons, get rid of the, you know, huge goals of making money or the crazy, unrealistic expectations. Put your head down, focus on it. Focus on the process. And I promise, in a long period of time, you will have a higher possibility for success. Traders don't know how to lose. Yes, I know it sounds weird. It's like, wait, what do you mean traders don't know how to lose? Yes, to be a successful trader, you need to know how to lose. And I see a lot of traders that aren't profitable. They have a difficult time on losing. It could be because of ego, it could be because they don't know how to deal with losses. Whatever the case may be. I don't know, everyone has different issues, but the idea is to understand why are you losing and then when you do lose, being okay with it. So let's just take a quick step back because I know some people like, what do you mean you have to be okay on losing? What do you mean you have to be good at losing? It's because most of trading, you will be wrong. Most of trading, you will lose. The little trading you do win in is the trading that will compound and make the most money if you have the proper risk management. I see traders that, once again, as I mentioned, they'll have good months, good weeks, but the moment it's not time for them to lose or they do lose, they go crazy. They'll go erratic. They do not know how to control themselves. They do not know how to manage the loss. Our job is to always protect our downside. Our job is to know, if this trade goes wrong, how much will I lose and where am I comfortable in losing and what is an okay amount in losing opposed to your account size when you are wrong. There's two things to look at, and this is how I look at it. If I'm wrong in a trade, I like to look at it from two perspectives. Number one, let's say I'm wrong. I lost money. Like, did I follow my game plan on this trade? Because there's a good loss and then there's a bad loss. A good loss is a trade that I followed my game plan right? I followed the market moves. I had an edge and the edge just didn't work. And that's okay. There will be times your edge, your strategy, your playbook, your setup does not work. It won't work 100%. So when it doesn't work, I need to ask myself, like, Did I have a high probability of it working during the time? And if I did and it didn't work out, cool, I live with it. I'm okay. Then it goes into, did I follow my game plan? Did I follow my stop loss? Did I lose the amount of money I planned to lose? And yes, we plan to lose money. So that's where risk management comes in, which I'll talk about. But we plan to lose money in every single trade. Did these things happen? And if that's a yes, then you followed your game plan, you followed your risk management plan, and the trade was a success even though you lost. Now, there's a different component of where you lose money, but you didn't have an edge. You took a random trade. You didn't follow your stop loss, or you didn't follow your risk management plan, or you didn't follow your game plan. And instead of you losing 500, you lost 2000. Now that's where you actually have a bad loss. So you want to also identify what's a good loss and a bad loss. And this is why, like I mentioned, journaling, tracking your trades are very important because it allows you to kind of combine what is good, what is bad. But as traders, you need to ultimately know when to lose and how to lose, because you will be wrong majority of the time. And when you are wrong, you have to be able to assess, like I mentioned, the good trade and the bad trade. And if you can assess both of them, it will give you a better peace of mind of knowing, well, you know, I will be wrong most of the time in training, I will be having bad trades. I will be having trades that don't go in my favor. So when that happens, there's times I need to be okay with it, because as traders, we put on risk to make more money. And when we are wrong, we have to live with the risk as long as the probability and the outcome was most likely in our favor. So, yes, if you want to make it far in this game, learn to lose, become a good loser, learn to manage risk, Learn to manage your emotions when you do lose. And don't just go crazy when you have bad losing days. Right? Because some traders, like I mentioned, have one good month, and that one day or one week destroys all of their gains. So just make sure you know how to manage yourself during losing periods. You know how to manage yourself during a loss, and you also manage your loss accordingly. The last reason I think traders have a difficult time in being profitable or staying profitable is risk management. Like that Is one of the biggest reasons our job as traders is to manage risk. That is the only thing we can manage. We cannot manage the outcome of a trade. We cannot manage if a trade will go higher or lower. We can take a trade based on our edge, based on the probability of us believing that this trade will go higher, but we cannot control the outcome. What you and I can both control is, hey, if we are wrong in this trade, right, and this trade proves it's wrong, what is the amount that I'm okay in losing according to my account size? And that will also be in contingent or in line with me being wrong. Like, how do I put those two together? One of, hey, if I do take this trade and I am wrong, what is that appropriate position size that I should take where if I'm wrong, I can lose the 200 or I can lose the 2000. Now, most traders, when they enter a trade, they immediately look at the trade from, oh, man, when I take this trade, I'm going to make $2,000 or I'm going to make $4,000. And that's not a good approach. The approach that I take in every single trade is if I take this train and I'm wrong, I will lose 500 or I will lose 5,000. Am I okay on losing 5,000? Of course, no one is naturally okay on losing money. But once again, like I mentioned in trading, you will lose money. It will happen. You have to become a good loser. So when I do take on trades, I am at times okay on losing that amount. I am okay on putting that risk on. And if I'm comfortable and okay with that, I will take the trade. And I'm also mentally prepared to lose that money and I'm okay on focused on that loss. I don't take a trade. And which is what a lot of traders do with they take a trade, they're like, well, I'm risking 5,000. I know I'm going to make 20 on this. So I'm not worried about the 5,000 because I'm going to make money. And that's such a toxic trade or mindset to have. Because if the trade does go in a loss because you weren't mentally prepared for it or ready to take the loss, it can put you at a big disadvantage. What I would do and what I want to share with you guys is before I take any single trade, I always have a mental stop loss like, okay, well, if the trade gets to this level, I know I will be wrong. If I am wrong and based on my position, size and how much I should invest or put on size. I will lose $2,000 or I will lose $15,000. I am okay with that. Okay. The trade makes sense. I have an edge on the trade. Cool. I put the trade on. When I put the trade on, I'm mentally only thinking about my downside, which is the only thing I can control. I cannot control if this day trade goes up or it goes down. But if it does go down, I know what my max loss is. And that is what you as a trader should focus on. That's what you as a trader should shift your mindset to. And if you can shift your mindset to what your lost amount is on every trade, it will allow you to, you know, take on better trades and also, also allow you to deal with losses better. In my opinion. Those are some of the reasons that I believe traders have a difficult time being profitable or they're not so great at trading because of those reasons. Let me know down below on what, what are some of the reasons you have a difficult time on being profitable or what are some things you have a difficult time with in general? With that being said, just want to say thank you for watching the video. I hope you guys tune in for more and yeah, see you next time.
