Lesson 2: Why did the market eliminate individual traders? | Orion Trading Academy

Lesson 2: Why the market eliminates individual traders?


The financial market is a complex and dynamic environment, often challenging for individual traders. Understanding how and why individual traders are frequently eliminated from the market is crucial for survival and success. This article will explore the common pitfalls that lead to the downfall of many traders and how to avoid them.

Entering Big Movements Too Late

Many individual traders are lured into the market by significant price movements, often influenced by the allure of quick profits. This behavior, known as ‘chasing the market,’ can be detrimental for several reasons:
  • Lack of Systematic Training: Traders without formal training or a solid trading plan often enter the market without a clear strategy.
  • Failure to Set Stop-Losses: Without proper stop-loss measures, traders expose themselves to uncontrolled losses.
  • Reversal of Trends: Late entries often mean catching the tail end of a trend, leaving traders vulnerable to sudden market reversals.
To avoid this pitfall, traders should focus on developing a disciplined approach, resist the urge to chase trends, and wait for opportunities that align with their strategy.

Not Knowing When to Stop-Loss

The concept of ‘stop-loss’ is fundamental in trading yet often ignored by novice traders. A stop-loss order is designed to limit an investor’s loss on a security position.
  • Importance of Stop-Loss: Setting a stop-loss is essential for risk management, limiting potential losses to a predetermined amount.
  • Pre-Trade Preparation: Before entering any trade, traders should be prepared for the possibility of loss and set an appropriate stop-loss level.
Ignoring stop-loss orders can lead to catastrophic losses, especially in volatile markets.

Gambling Mentality and Revenge Trading

A significant mistake that leads to the downfall of many individual traders is a gambling mentality and the pursuit of revenge trading.
  • Inability to Accept Losses: Traders who cannot accept small losses often take bigger risks to ‘win’ back their money.
  • Doubling Down on Losses: Increasing position sizes to recover losses can lead to even more significant losses.
  • Emotional Trading: Letting emotions dictate trading decisions, especially after a loss, often results in irrational and impulsive trades.
To counter this, traders should adhere strictly to their trading plan. After consecutive losses, it is advisable to take a break, reassess strategies, and calm emotions before returning to trading.

Being Rigid and Outdated

The market is an ever-evolving entity, driven by human behavior and global events. Relying solely on past market patterns without adapting to current conditions can be a recipe for failure.
  • Market Unpredictability: Historical patterns do not always repeat themselves in the same way.
  • Need for Flexibility: Traders should be flexible and adapt their strategies to current market conditions.
  • No Standard Answers: Trading is not about right or wrong answers but about risk management, understanding market dynamics, and using tools and experience effectively.


To avoid being eliminated by the market, individual traders must avoid these detrimental habits. They should cultivate disciplined trading, understand and implement risk management tools like stop-loss orders, avoid emotional and revenge trading, and remain adaptable to changing market conditions.
The market is not a place for gambling; it requires a well-thought-out strategy, continuous learning, and emotional control. By recognizing and mitigating these common pitfalls, traders can increase their chances of long-term success in the volatile world of financial trading.

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