Why Day Traders Fail and What You Should Do To Avoid These Mistakes!

Why Day Traders Fail and What You Should Do To Avoid These Mistakes!

I think we agree that most of the day traders fail. They fail because they don’t stick to the rules and strategies that are present in the market.

I am going to list all the reasons Why Day Traders Fail so that you avoid doing that mistakes again and get into winning ways in Stock Market.

Let us Break Down why does this happen and what are the things you should be doing instead!


Let’s Look at the Top Reasons Why Day Traders Fail [ Step by Step]!


1.Getting Emotional While Trading

Emotions Play a very Huge role in trading. The moment you put emotions into Stock Trading, that is the very moment you will start losing your money.

People often try to avoid losses, and by avoiding losses they are in fact inviting the losses.

Yesterday, one of my friends lost one trade and I told him to stop for the day, But you know emotions are always rolling in. He insisted on doing one more trade so that to square up the losses.


One more losing trade!

That’s what emotion does to your trading.

[bctt tweet=”Trading is more of a Psychological Game rather than an Income Game.” username=”unveilmycareer”]

2. Improper Money Management

This is another factor that plays a vital role in making profits. Money Management is what will define your success story in Trading. If you get this part right, I bet, you will make consistent profits, in the long run, no matter what. This is where most of the people lack when it comes to trading.

Let’s assume you use 1:2 Risk to Reward Ratio for all of your trades and see what happens here and why it is so important?

Let’s suppose you want $10 Profit and you are willing to risk $5 for that. That means either you will make $10 or lose $5.

If you have an amazing strategy for Intraday trading that has nearly 60% success rate( and there are many strategies that have a higher success rate, but let’s just stick with 60% success rate for calculation purpose), what happens is that out of 20 days in a month, 12 will be winning trades and 8 will be losing trades according to 60% success rate.

12 Days Profit = 12 x $10 = $120

8 Days Loss = 8 x $5 = $40

Net Profit = $120 – $40 = $80

You see that? Even losing 8 trades you are making a profit!

That’s not all…

Even if considering the worst case scenario assuming you lose trades for 13 days, then let’s see what happens!

13 Days Loss = 13 x $5 = $65

7 Days Profit = 7 x $10 = $70

Net Profit = $70 – $65 = $5

Considering your Intraday Strategy Success Rate is 30%, even then you are in Profit because of the fact that you have a proper money management system in your place.

That’s the power of risk to reward ratio. If you don’t follow this mantra, obviously day traders are ought to fail. So, Money Management is very very important as far as Day Trading is concerned and you must follow it no matter what.

You can try different risk to reward ratios according to your capital. But a proper Risk to Reward Ratio can make wonders and improve your Portfolio with a considerable margin.

3. Being Greedy and Over Trading

People often Over Trade on a given day. They overtrade so as to square up their losses that they had faced in the initial trades. By trading more, they are inviting more losses rather than profits. Now, of course, its a probability but a high probability of losing.

The maximum you should trade is 1-2 Trades a Day. When people try to trade more than 4-5 times, obviously they are going to end up in losing streaks.

Now I don’t say its a hard and fast rule that if you over trade you lose money, that’s not I want to highlight. You might even get profits from all the 5 trades that you do. But what’s important is that Winning in overtrading has a very low probability rate.

If you don’t over trade, you are stacking up the probability of winning by a margin of 80-90%. Also, when you over trade, people start getting emotional, and when emotions pour in, you know what happens!

You end up losing, lol.

By not overtrading, you are making yourself disciplined and that’s what you need to be when you are trading in the stock markets.

4.Averaging and Expecting it will go through

Averaging is a very risky trading strategy and most of the times it will end up losing a mass amount of your capital wealth.

What happens in averaging is that you buy 10 shares at $20 and the price falls to $16 and you buy more shares at $16 expecting it to go upward later on. So now the average buying price value is $18. Now you are expecting the stock price to go upwards, considering you are using any technical indicators for this strategy.

What if the price falls to $12?

Your loss = $80 + $40 = $120.

You end up losing $120 expecting the price will go up. Averaging is a very risky concept and you should completely avoid it.

5.Being Inconsistent

If you want your strategy to work and if you want to make profits in the long run, you should remain consistent no matter what. Why day traders fail is that they are not consistent in their trading strategies. They constantly try to change plans, strategies, timing, the risk to reward ratios, etc.

People will trade for 1 month or even 1 year and make significant profits too, but in the long run, they become inconsistent and stop trading finally. To make profits in the long run and utilize the Power of Compound Interest, you should remain consistent in your trading strategies.

Stick with your plans, strategies, the risk to reward ratios and believe in it persistently and consistently.

6.Not Enough Researching

Another factor why day traders fail is that they don’t research what they are doing. Researching plays a very important role in trading. Whatever strategy that you are going to use must be properly researched and analyzed before even applying it.

Paper Trading can make your life whole lot easier. Read here How Paper Trading can make your Trading Better!

7.Not Disciplined For Trading

If you don’t show any discipline in Trading, you are ought to lose your money. What that means is not sticking to any of the above rules will end you up in losing streaks. Fix your entry point in the market according to your strategy that you choose. Stick with it consistently over a prolonged period.

Stick will all the above rules I mentioned and not to repeat the same mistakes all the day traders do while trading.

You will get the fruits of being disciplined over a period of time.

Some Frequently Asked Questions

What percentage of day traders lose money?

There is a common fact amongst the Wall Street, that almost 96% of the Day Traders Lose Money.

Are day traders successful?

It Depends. There are Day Traders that are extremely successful and almost the majority that fails. It all depends on the winning rate, your strategy and your psychological mindset.

Can I Make a Living by Doing Day Trading?

Yes, You can. But it can be extremely difficult at the starting. It is recommended that you build a nice capital first and then start off with trading.

Is day trading illegal?

No, Ofcourse it is not illegal. But Yes, Crypto Trading can be illegal in some countries. Make sure you read the rules of your government before doing anything in Cryptocurrency Trading.

How many times can you trade stocks in a day?

You can trade as many number of times you can in a day. But it is oftenly said, don’t over trade meaning don’t try revenge trading as it can reduce your capital in a flash.

Is it a day trade if you sell then buy?

Day Trading means if you buy and sell stocks on the same day. Same applies to the reverse i.e Short Positions. If you sell and then buy stock on the same day, it is called Day Trade.


In the end, this is what matters the most when it comes to trading. Trading is not for those who don’t have patience. It’s not for those who show emotions, who lack disciplines, who follows the herd and don’t research by themselves.

You have to research yourself and not to listen to what others say. So now you know why most of the day traders fail in stock markets, you can avoid doing these mistakes and find your winning way into Day Trading.

Let me know in the comment section what are the problems you face while day trading and I will be happy to help you out OR if you have a more detailed problem feel free to contact me here.  

Happy Trading!

Tejas Rane

Tejas Rane is the Author of 7 Effective Job Search Strategies. His aim is to help Indian Youth Get Job Offers Through Smart Ways. A Digital Marketer by Profession, Computer Engineer & has a keen interest in Personal Finance. His Idol is Warren Buffet & Ray Dalio. Find him on Twitter( @tejas3732)