Common Behaviour Amongst Traders

It is widely known that a significant proportion of retail traders—estimated between 80% to 90%—engage in behavioural patterns that are detrimental to their success. Many traders struggle to achieve consistent profitability when trading Contracts for Difference (CFDs) or engaging in spread betting. This is not due to a lack of intelligence or ambition; on the contrary, the majority of retail traders are highly motivated individuals who strive to carve their own path and seek financial independence.

The notion that trading attracts the wrong type of people is a misconception. Instead, it often attracts self-starters, entrepreneurs, and students eager to learn. These individuals tend to be sceptical of get-rich-quick schemes and are aware of the low odds associated with games of pure chance, such as lotteries. However, despite their intelligence and ambition, most traders still fail.
Why does this happen?

The Psychological Struggles of Managing Losses

One of the most common pitfalls is the inability to control losses. A major contributing factor to this issue is the lack of a stop-loss strategy. When traders find themselves in losing positions, they often hold onto them in the hope that the market will reverse in their favour. This behaviour is driven by a psychological resistance to admitting defeat. The mind, in its effort to protect the ego, convinces traders to keep their positions open rather than realise a loss.

The psychological struggle in trading is not about hope itself but about the avoidance of pain. Many traders will continue to fund their accounts to meet margin calls rather than close a losing position. Interestingly, when the market eventually does move in their favour, they often close the position immediately—not because they had confidence in the trade, but because they are simply relieved to no longer be wrong. This irrational decision-making process highlights the powerful role emotions play in trading.

The fear of losing profits
Another prevalent issue amongst retail traders is the premature exit of winning positions. Many traders justify this behaviour by reasoning that “you can’t go broke taking a profit.” However, this often stems from a fear of losing accumulated gains rather than a strategic decision. The subconscious mind treats the potential loss of profits as a real pain, leading traders to take action before any actual threat materialises.

When a loss does become a reality, traders frequently resort to reckless strategies such as doubling up on their position in an attempt to recover their losses quickly. This behaviour stems from an emotional need to return to a state of psychological equilibrium rather than a sound trading plan. Unfortunately, this approach often leads to even greater losses.

Trading with Confidence and Discipline

One of the most valuable lessons a trader can learn is to execute trades with clarity and control. Fear, hesitation, and self-doubt can prevent traders from executing well-thought-out strategies. Many traders experience moments where they recognise a promising market setup but hesitate to act due to fear of loss. This hesitation can be detrimental, as success in trading often requires decisiveness and confidence.

Rather than focusing solely on where to exit a trade, traders should consider where to increase their positions when the market confirms their strategy. Developing the ability to execute trades without fear requires practice and a deep understanding of risk management. By shifting their mindset away from the emotional highs and lows of individual trades, traders can improve their overall consistency and performance.

Final Thoughts

Understanding the psychology behind trading is just as important as mastering technical analysis or market strategies. The ability to manage fear, pain, and hope can make the difference between success and failure. Many traders fall into self-destructive patterns not because they lack intelligence or ambition, but because they struggle with emotional discipline.

By recognising and addressing these behaviours—whether it's holding onto losses, exiting winners too early, or increasing risk irrationally—traders can develop a mindset that favours long-term success. Trading isn’t just about making money; it’s about managing risk, staying objective, and executing trades without fear or hesitation.

At TraderGuide, our goal is to educate and support traders in their journey towards financial success. Understanding and overcoming these common behavioural patterns can be a crucial step towards achieving consistent profitability in trading.