Kind of a deep thought question here. Why is losing the norm for something that is random at worst (should be 50/50 win/lose) or trending (just go with the flow)?
They say (and statistics show) that 85% to 95% of all traders lose money.
Why isn't that closer to 50%?
This is kind of digging into that issue I know a lot of traders deal with where it seems like if they had just placed the opposite trade, they'd be trillionaires. A coin flip. Which should be 50/50, but we know is skewed more toward losing.
I don't know. I need excedrin.
Posted by Investaholic1
48 Comments
take the day off bro
It’s not 50/50. Stocks go up, down, or sideways. If they go up or down, just not fast enough, you still lose. You’ve got a 1/3rd chance at best.
Timing the market vs. Time in the market
Because options are not 50/50. They’re 33/33/34. Up, down, sideways. Not acknowledging things going sideways and you still losing is a rookie mistake.
People are greedy and dont take profit
House always wins
The **odds** are NOT 50-50, the **outcome** is.
That’d be like saying people jumping off of a 10 stories building should have a 50% survival rate on average because you either live or die.
Add to the other comments here – if you keep rolling your winnings into the next play, you’re going to hit that complete loss especially with options. It doesn’t matter if you gain 1000% if you lose 100% the next play.
Because people cut their winners too soon and hold their losers too long.
You have to do the literal opposite of human nature, which is very difficult for most normal people.
There was a study done on a pool of 10,000 traders, and the average win rate of the group was like 63%, yet almost all of them were unprofitable. (Can’t remember the name of the study but it looked at 43 million trades among these 10k traders.)
The study found that traders were cutting their winners early, and holding their losers deep into the red. Fear is the reason you cut your winners early, fear that you’ll lose your profits. Hope is the reason you hold losers too long, hope that it will come back.
If you can you can retrain your brain to literally do the opposite of human nature (inverse yourself,) you may have a chance at profitability.
Humans trade with emotions and arent consistent
Algos trade based purely on data
Because it isn’t 50/50. Imagine you bet in roulette on the 7. It is not 50/50 like “the ball hits 7” or “the ball does not hit 7”. The chance to win is 1/37. The return is 36/1.
Trading costs fees and interests. If your idea fails/succeed 50/50 you will still pay the fees. This is the 36/37 issue of roulette.
If 37 players play roulette and split their plays on all options, 98% of player will loose money. only 2% player and the bank will win money.
Example: I bought an 80x leveraged knockout on Nvidia. On 14:00 this day there was a short global dip of all stocks and my asset is knocked out. A week later nvida reaches all time high and some other fucker just bagged a 100x return.
Because the game is path dependent and most people have short term inclination. Imagine sitting at a poker’s table with no bet limit. The guy with endless stash is statistically guaranteed to wipe out most players with much smaller stash. Winning small players will eventually be wrong, and losing big player will eventually be right, so winning all of it back, since the big player with endless stash has the longest standing power. Every day in the market, volatility and the price zig zagging were optimized to be max pain for most small players. Small players who bet on the short term almost always lose.
Transaction costs over time are a major reason. Why else do you think Citadel Securities loves the anti Citadel trading flow. Beyond that most of what WSB’ers do are not 50/50 outcomes. 5/95 most of the time. Stack a few wins and you are a “genius”.
For every loser there is a winner
Cuz if it wasn’t then the “are ya winning son?” Meme wouldn’t be funny
Because you are the dumb money that allows the smarter investors / speculators to profit.
Would you rather buy 100 lottery tickets, get 99 duds, but 1 that’s a million dollar jackpot?
Or would you rather sell 100 lottery tickets, 99 of them duds, but one of them is a million dollars that you have to pay out?
You can lose 99% of your trades and still be profitable. You can win 99% of your trades and go bankrupt.
Greed.
And inability to walk away from a loser quickly.
Respect the % chance of winning displayed on your brokers when playing options. Also there is a reason why hedge funds sell options way more… cuz the win rate is much higher. Accept you are basically gambling here and you’ll have fun.
Read about Wyckoff’s *The Composite Man*. We literally can’t win but we can sure as hell have fun trying!
the real reason is because people trade based on what information they are given, and most of the time the information that people are given is intentionally misleading, the smart money will literally pay off “experts” and “analysts” to put out bs articles talking about reasons to buy/sell XYZ stock in order to influence retail investors, and the vast majority of retail investors take the bait, and then you also have people who trade based solely on chart patterns and, again, smart money manipulates that too, they know exactly where traders are going to be entering and exiting their trades, and since smart money can quite literally move the market in any way that they choose, they know how far to move the price to trigger retail investors’ buy/sell orders in a way that only benefits themselves and screws over retail investors
Because when we win, we think it will happen again, so we take our winnings and use them UNTIL we lose.
people are irrational
A lot of psychologists and economics teacher have written about this. It mostly boils down to how the brain works, most people see stocks are up the buy. Then when they are down they sell. You’re supposed to do the opposite.
Posting my previous comment about why Options contracts are designed to lose money: Options are actually a type of insurance policy.
Imagine you have around 1,400 shares of META stock, and you’re going to use it to retire. But you’re worried that in the next 6 months, the price will drop significantly before your plan to start selling the stock for retirement money. Instead of selling the stock now, you could instead buy something like 14 put contracts with a strike price at or around the current price of the stock, and an expiration date 6 months out.
This way if the stock price goes up, you’re happy because now your investment is worth more. And if the stock price drops massively, no worries because your put contract allows you to sell the stock at the strike price, even if it dropped lower in reality. And the only cost of this safety hedge is the premium that you paid at the outset. That premium is a near guaranteed loss in most situations, but it allows you to smooth out bad situations. This should sound familiar because that’s how traditional insurance works. You lose a small amount of money to guarantee avoiding a bad situation later.
So with that in mind, buying short-dated options contracts just means you are paying high premiums on repeat. Insurance policies are DESIGNED to lose you small amounts of money, so obviously those people who spend lots of money buying loads of insurance policies are going to drain their money away quite quickly.
It’s not about the number of traders, it’s about the amount capital deployed. The smartest 50% of capital is perhaps roughly positive, but a lot of that was invested by big players, not by the hordes of retail traders that have the tendency to do dumb stuff on a whim.
The odds of winning or losing money in the stock market aren’t 50/50, in fact they are much better than that and in your favor too! Why? Because in the long run the stock market has trended higher, therefore logic dictates that the average participant has to make money over time from being in the stock market. Instead, you may be confused with the observation that most people underperform the market as a whole, which in case the market is down, can also mean you’ve simply lost less money than the average participant (but you’ve still outperformed your peers). This underperformance of market gains or losses is a real thing, and can be explained by two things. First, transaction costs eat into your return (logically, the more you trade the higher the transaction costs and the wider the underperformance on average). Second, a lot of people who actively trade do worse not only because of transaction costs, but also because active trading feeds an important psychological bias, namely loss aversion (most people will be heavily inclined to sell when the market is down and avoid further downside, and to buy when the market is at its highs, when optimism reigns supreme and everybody else is making money). Of course this is the exact opposite of what is rational, which is to buy more when the market is down.
Because people here like to gamble on 0DTE OTM options and the win probability on those is close to 0
90% of you are morons and can’t find your asshole to pull your head out of it.
Fear and Greed. The two most important emotions which drive most of human behaviours, including trading.
> losing the norm
Well, it is in this sub because most of what you see are the worst fucking plays imaginable
It’s not a coin flip though. people are betting again human nature….their own human nature. Most people I run into do not have a good read on themselves. The exception being drunks, they are brutally honest.
Damn you must be new here.
Bet sizing if not intuitive.
Haghani-Dewey Biased coin experiment: Tossing a 60/40 coin and betting 50% each time will result in near total loss.
Here are some things i’ve heard about but didn’t read up on and definitely don’t practice:
* Kelly criterion bet sizing: too lazy/stupid/undisciplined to do this.
* Merton’s portfolio: I keep forgetting what this is, but it’s related to kelly
* Martingale strategy: results in total loss. I do practice this strat actually
and other smart sounding things i’ve forgotten and don’t practice. Plz comment if you there are more, so that I know the name of the thing that i should be doing but am doing the opposite of
Bro began his “deep thought” with a losing premise. It’s not 50/50… simple.
Because you gotta just hold on to companies you believe in that actually make sense. I’ve been holding Apple since it was the equivalent of $60 before split it’s over $200 now. Stop selling and gambling on BS just invest long term or buy leaps if you wanna be regarded. Stop trying to game the system you might get lucky but most likely will lose.
No risk mitigation. Being able to recognize losers and take the 10%L and get out to die another day is a W.
Stock picking is not random. The most you can lose is 100%, whereas the most you can win is regularly higher (10x, 50x, 100x, etc.)
If stocks were like flipping a coin, then I bet most everyone would perform the same. Instead, only the patient investors play long enough to see their successes overwhelm the short term fluctuations
Most people fight against the really good odds of the stock market, effectively pushing themselves into the losing category.
It REALLY matters whether you are investing in strong companies with good prospects then waiting, or whether you have created a maze of artificial rules to try and outsmart a super favorable game, that requires nothing from you except delayed gratification and patience
Source: I’ve gone insane from holding my bags 💰
Because most companies like 80% on the markets are there to be financed by investors while they dilute their shares so most of them continuously go down while most traders buy way more than they sell.
Most traders never short companies because in theory there are more risks involved and it is not like buying something interesting.
Traders should just stick to buying Spy or Qqq until recession data.
Because the big players have invested a lot of time and money to learn how humans think and trade. They use their findings and deep pockets to inverse your trades and take your money. It is definitely rigged in that sense
You are presuming it is random and not influenced by humans (ego, greed, fear, etc) who are, unknowingly or not, dead set on shooting themselves in the foot.
Major bear markets like 1973-74, 2000-02, 2007-09 burn most everything down. Most traders have depleted accounts; they have to stop trading to raid their accounts for living expenses, and are sometimes out of a real job without money for trading.
When it is the bear market bottom and most optimal to invest, few have the money to do so.
The fact that you think the movement of the stock is pure chance is a reason why people are losers. It’s not chance, it’s an extremely complicated, multivariant chain of events that contains unknowns (that appear random). To continue the coin flip analogy, a stock price is more like poker. The cards are unknown and thus “random” but the best poker players continue to win because they don’t play the cards, they play the players. Knowing when to hold and fold is the biggest factor.
Emotions. Fear and greed make for silly decision.
If you’re a constant loser, might want to consider covered calls on a div. king.
Emotions, they sell when it gets too bad and have a tight leash on their winners
A different perspective from a Boglehead here.
If you bet on the whole market (passive investor), you gain market return. That’s because you own x% of each stock in the market.
If you don’t bet the whole market and want to tilt the portfolio and time the market (active investors) then you might be better or worse than the market. However, in aggregate, all these people adds up to 1-x%.
Because the market return a%, x% of the market returns a%, by definition, 1-x% also returns a%.
However, those who don’t bet the market has to do a lot of research, pay a lot of transaction fees, options cost etc. So they add a bit of cost to that, so by definition, in aggregate, they will return less than market return.
That’s why losing is so common because it is literally impossible for everybody to win. Someone wins necessarily means others will lose. This not only applies to retails. Even hedgefunds will not beat the market over the long term.
[https://www.spglobal.com/spdji/en/research-insights/spiva/](https://www.spglobal.com/spdji/en/research-insights/spiva/)
My uncle was a losing trader. He practiced DCA (Dollar Cost Averaging) on losing stocks a lot. When he finally quit trading he gave me a piece of advice that I always keep in mind.
“Just when YOU think a stock can’t go any lower and it’s at the bottom DON’T BUY. Wait until it drops another 30%.”
A lot of other commenters are right. You have to go retrain your brain 🧠 and not listen to yourself sometimes in certain situations.
Because traders are irrational and emotional. I will give you an example, when you lose on a stock, you refuse to give up even though all the signs point to it being a loser. The logical approach is to get out of that bet and put into a better bet. After all, it doesn’t matter where your gains came from as long as the come, yet you don’t want to give up on it so you hold it for more losses.
I’ve barely made much money but I’m profitable my first year trading. My 2nd year trading currently and I’m still profitable YoY and YTD.
Then again I don’t do 0DTEs like a moron or try to trade every single day. I swing trade when I see an opportunity to ride a stock upwards and hold the trade for weeks or months.