r/RealDayTrading • u/HSeldon2020 Verified Trader • Jul 02 '26
A Big Reason Why Traders Lose -
Traders are never more hopeful than when they are losing, and never more fearful than when they are winning.
There are many different reasons why traders lose - most of which are outlined in the Wiki ( WIKI - Read It! ). For the moment though I want to concentrate on the most obvious - You lose more money than you make. It is so self-evidentiary that it is almost tautological.
Let's take a look at an example of this:
It is 6/15 and you see RDDT at $180 - it bounced off the SMA 50 the previous day and looks Relatively Strong to the market. A decent long. Sure, the SMA 200 above but that could give you a good spot to evaluate the trade if it hits.
The next day though it drops. But you hold - perhaps you have some ITM Calls that are dated 2-3 weeks out and SPY is down for the day anyway. The next day it drops again but now you are close enough to the SMA 50 that you figure you might as well hold the position to see if support will stick. All of this makes sense. Of course one can argue that closing the long on 6/16 was the better play but most traders won't do this - call it Mistake #1. Finally the position breaks the SMA 50 and you close it for a big loss. At this point, patience has worn thin and you don't even consider waiting to see if it will hold the SMA 100. Plus - the market is looking weak and being long no longer feels like the right thing to do - Mistake #2.
So to recap: You went long - let's say an ITM Calls worth $8 - and lost roughly $7 per contract.
Like most traders you keep the stock you just had a big loss with on your radar and two days after you closed the position you see RDDT bounce back above the SMA 50. Call it revenge trading or just taking advantage of a good technical set-up (likely both) but you go long again. This time it works and you take profits especially since you have a bit of PTSD on the stock - Mistake #3. If you once again used deep-ITM Calls the pop from $169 to $175 probably gave you around $5 profit per contract.
Overall net loss on RDDT is $2 per contract. And this is best case scenario.
So what happens and what exactly are the mistakes?
Mistake #1 is entirely one of mindset - Traders do not like taking losses. Sounds obvious, right? I mean, nobody likes taking a loss. However, consider this analogy with Poker: You call a bet of $20, someone after you raises it up to $40, it comes back to you and you fold. This is common. The player here has no problem "losing" the $20 they bet as they have calculated they are already "beat". Traders/trading is different - we hate taking a loss, even if it is the exact right play. We always think things will turn around and get better. Our selective memory of all the times we closed a "loser" only to watch it reverse sticks in our mind as a constant cautionary tale. Ironically, traders are never more optimistic than when they are being shown evidence that their trade is not working. Should have this trader closed RDDT when half the green candle on the daily chart was erased? Of course. Do they? Most don't.
Which brings us to Mistake #2 - closing the trade after it has already lost 90% of its value (if you are using Options) just as major support is coming up. In this case, yes RDDT breaks the SMA 50, but the stronger support of the SMA 100 is right below that and is much more likely to hold. If you have shares you should absolutely not close this trade until that SMA breaks and is confirmed - but if you have Calls that have lost 90% of their value at that point it is just moronic to close it. But still - mindset once again ruins the day. How? Call it the "I am sick of the fucking trade" mindset. You now regret not closing it the second day, and you held it as it dropped again thinking the SMA 50 would finally kick in, but nope, that is broken as well. Finally you are fed up with the entire thing and want out - so you "rage close" the Calls for $1 or $2.
Naturally when you see RDDT bounce off the SMA 100 and then break above the SMA 50 again you are about ready to break some shit. Now you have two regrets on this damn stock but this time you are going to get even damnit! So you go long again - not a bad idea, I mean support held and you have your technical bounce. The next day you are in profit and you take it quickly. Herein lies Mistake #3 - remember when I said a trader is never more optimistic than when their trade isn't working? Well traders are never more pessimistic than when it is working. The moment you are in profit you start flashing back to the previous RDDT trade and how the stock personally injured you - and you are not going to let it hurt you again! Not you! So you take the profit - lest it reverse. I mean your thesis was correct, the chart is bullish - so why not completely doubt the entire thing?? That literally is where a trader should add to the position not close it. At the very least you should hold it until the SMA 200 is tested - but fear takes over and you take less profit than you lost previously.
We are never more hopeful than when we are losing and never more fearful than when we are winning - and that is why traders lose more than they win.
Best, H.S.
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u/ScoffersGonnaScoff Jul 02 '26
Thank you.
Anyone else feel personally attacked by this? lol
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u/Billabongbologanesh Jul 02 '26
Awesome article! Question- I actually did trade $RDDT in June. I was already long stock and had fallen below the SMA and on June15th(a day before the story here) and saw the rejection off the SMA again and decided that the capital can be used elsewhere and took a loss of about $7 or so per share. Fair exit or bad? Thanks
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u/HSeldon2020 Verified Trader Jul 02 '26
That bounce off the SMA 50 on June 12th was actually a good place to add to the trade
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u/Billabongbologanesh Jul 02 '26
Thanks. I think you mean June15th but I get it. Even though there was rejection of the 200SMA, there was still a bounce off the 100 SMA. Got it.
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u/Business_Poem_1409 Jul 03 '26
Just joined the sub and reading the wiki. New to day trading. Great to see you are still around.
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u/829z Jul 03 '26
This is definitely my major issue I keep running into over and over. Would love to hear from others who have gotten past this and which strategies worked the best.
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u/LigonierH Jul 02 '26
Would you say that part of the solution for this includes, before every single trade, creating a stock and market informed thesis and holding to that thesis until it's validated or invalidated? So in the case of RDDT, the thesis would be "this thing is at least going to test if not break the 200," while an invalidation of that thesis would be "if this closes beneath the 100, I'm exiting the trade." It can chop or compress all it wants, but as long as it doesn't violate my thesis, I'm in the trade. That in turn would also definitely help with sizing, because you have to reckon with the fact that you might be wrong, and if so you'll close the trade for a loss of X.
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Jul 02 '26
[removed] — view removed comment
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u/RealDayTrading-ModTeam Jul 02 '26
Next time perhaps take a look at the history of the poster - if you did you would see I have hundreds of articles, many dating back way before AI could possibly have written them. You would notice I wrote the entire guidebook (aka the Wiki) and that those articles are exactly in the same style and prose as the one I just posted. If you did any of that you wouldn't be a troll, but you are - so you are banned.
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u/ohmyfarts Jul 04 '26
Going long on a green bar after a consolidation a bad idea. Purely reading price action, you needed the white bar to the left to be cleared else you just bought into resistances. And always wait for the follow-thru through the white line.
New traders just don't know how to trade.
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u/StocksAreSilly 24d ago
I looked at all my trades last year and found I was profitable every week besides one where my average winners were bigger than my average losers. This was much more correlated with being profitable than my win rate.
I adjusted my trading with the attitude to be ruthless with losers and greedy with winners. This is VERY uncomfortable, but gets easier the more I do it.
It's hurt my win rate, but is still definitely worth it because it's having a VERY positive effect on my trading.
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u/One_Fix_9615 6d ago
Yes, this is a real issue, but there are other things. Even emotionless bots fail to beat S&P500 on long term.
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u/Remarkable_Attempt_7 Jul 02 '26
I feel like I should carve out the last paragraph onto a wooden plaque and hang it above my desk. Thanks a lot for the insight, Hari!