Shocking But True: 90% of People Lose Money in Stocks (2024)

FAQs

Why do 90% of people lose money in the stock market? ›

Staggering data reveals 90% of retail investors underperform the broader market. Lack of patience and undisciplined trading behaviors cause most losses. Insufficient market knowledge and overconfidence lead to costly mistakes.

Based on several brokers' studies, as many as 90% of traders are estimated to lose money in the markets. This can be an even higher failure rate if you look at day traders, forex traders, or options traders.

How Many People Lose Money in the Stock Market? About 90% of investors lose money trading stocks.

It is a high-stakes game where many are lured by the promise of quick riches but ultimately face harsh realities. One of the harsh realities of trading is the “Rule of 90,” which suggests that 90% of new traders lose 90% of their starting capital within 90 days of their first trade.

No one, including the company that issued the stock, pockets the money from your declining stock price. The money reflected by changes in stock prices isn't tallied and given to some investor. The changes in price are simply an independent by-product of supply and demand and corresponding investor transactions.

But that's not all, the biggest reason day-traders lose money is the risk they take on. Day traders are more likely to make risky investments to reach for those higher potential returns, and as you can probably guess, high risk = high potential loss. You make a 15% return in 1 year (which is a great return by the way!)

1. George Soros. George Soros is a Hungarian-American businessman, author, and philanthropist. Soros also runs a hedge fund called the quantum fund which gave an average return of 30% from 1970 to 2000, making him one of the most successful investors of all time.

According to research, the consensus in the forex market is that around 70% to 80% of all beginner forex traders lose money, get disappointed, and quit. Generally, 80% of all-day traders tend to quit within the first two years.

It might sound as simple as “buy low” and “sell high,” but the reality is that the vast majority of traders end up losing money over time. Here's why day trading is an extremely difficult pursuit, and what's likely to happen when inexperienced traders get in over their heads.

Again, you technically don't lose any money in the stock market unless you sell your investments. If you simply hold your stocks until the market rebounds, your stocks should regain their value. The key is to ensure you're investing in strong stocks that have the ability to weather market turbulence.

Has a stock ever gone up 1000 percent? ›

Soleno Therapeutics (SLNO)

As I hinted above, Soleno Therapeutics (NASDAQ:SLNO) is the only stock trading on a major exchange that has gained by more than 1000% since the first trading day of 2023.

Lack Of Discipline

Most traders trade without a proper strategic approach to the market. Successful trading depends on three practices. First, investors need a guidebook/mentor/course to help or guide them in daily trading. Secondly, never forgetting stop loss.

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade. A decent trading plan will assist you with avoiding making passionate decisions without giving it much thought.

The 5-3-1 strategy is especially helpful for new traders who may be overwhelmed by the dozens of currency pairs available and the 24-7 nature of the market. The numbers five, three, and one stand for: Five currency pairs to learn and trade. Three strategies to become an expert on and use with your trades.

The futures and options (F&O) market is a complex and risky market, and it is no surprise that 9 out of 10 traders lose money in it. There are many reasons for this, but some of the most common include: Lack of knowledge: Many traders enter the F&O market without a good understanding of how it works.

Fear of missing out (FOMO), fear of losing, a lack of patience, and greed are common causes of rash decisions and costly blunders. Ineffective Risk Management: Failure to manage risk properly, such as putting too much money at risk in a single trade, is a common cause of failure.

The emotional aspect of trading often leads to irrational decisions like panic selling. When the market moves unfavourably, many traders, especially those who are inexperienced, tend to panic and exit their positions hastily. This panic selling often occurs at the worst possible time, leading to significant losses.

One of the primary reasons why traders lose money is because they fail to manage their risk effectively. It's crucial to set stop-loss orders and appropriately size positions to control your losses when trading stocks. Without proper risk management, even a single bad trade can wipe out a good chunk of your profits.