Why Most New Traders Lose Money (and How EAs Can Help Prevent It)

Trading is a profession where you can earn a lot of money instantly, and you can also lose your principal amount if you have not made rules and have no experience. There are several reasons that traders lose their money while trading. Some mistakes are common, and some are blunders. There are some tools that traders use to manage or reduce these risks of losses. You have to use them wisely to navigate through the market to the end of the day. Tools like expert advisors help you make better decisions, monitor the market, and perform many more functions to achieve profitable results. 

In this blog, we will talk about EA’s help in trading and also about why new traders are losing money on trading platforms.

SEBI has done a recent study where the regulatory authority found out that more than 91% of raiders lost their money in futures and options. Also, 70% day traders lose their money in the trading platform.

The loss rate over three years (FY22-FY24) was around 93% with total net losses exceeding ₹1.8 lakh crore (more than $21 billion USD) in aggregate. In larger studies on day trading statistics, estimates for failure rates are between 80% and 95% respectively. Less than 5% of day traders make a profit after five years.

Why Most New Traders Are Losing Money?

As promising or as appealing as it may look, trading can be a tough nut to crack if you do not follow the right steps or guidance. Mostly, newcomers do not follow the basics, set unrealistic expectations, and fall prey to their emotions of greed and fear. We have mentioned some of the most common scenarios where new traders lose their principal amount or lose a lot of money in one go. 

Without Any Plan 

A trading plan should serve as a guidebook to use while you are in the markets. Your plan should include a strategy, time commitments, and the amount of money you are willing to put at risk. Mainly, new traders do not have a plan, rules, or regulations, and their trading becomes speculation. Noting down your successful and unsuccessful trades will help you learn from your mistakes and make more informed decisions. 

Risk Management 

Most new traders lose money because they have not managed their risk properly. Setting a limit on your loss should be a priority. If you lose in one trade, you will opportunity to recover it on the next day or next trade. Not having a loss limit can burn your capital more quickly, and you will have fewer trading days. It is also important to understand your maximum loss per trade as a fixed dollar amount or a small percentage. Sticking to that stop when the price hits it and not second-guessing. 

Emotional Decision Making 

Emotional decision-making also leads to loss of money. When you make decisions based on emotions like fear, greed, then lose money. You come out of the trade early, fearing that you will not earn more and will lose. You stay in the market being optimistic or speculative that you will earn more. These situations can cause you to lose money. Emotions run over the mind and logic shifts, leading to false decision-making. 

Overtrading 

One significant mistake that traders make is overtrading. Overtrading is simply trading too often, and your losses subsequently exceed your gains, it may be done on purpose to bail out a position or by impulse.  New traders often do this, trying to recover from a previous loss, or just trying to make money. When traders are emotional or biased towards their trading, it leaves them open to impulse trading which will lead them to overtrading.

Lack of Practice and Education 

New traders have not done their part in education and have not practiced the concept. This can also contribute to false decision-making on the chart. Before coming to live trading, it is important to have a thorough understanding of the concept so that you can get what is happening in the market. 

Being Patient 

Patience is an important requisite in successful trading. Many times, traders become anxious or impatient when facing market moves that may feel favourable, or unfavourable, which can result in rash decisions that are not based on analysis or strategy. Exercising patience, allows traders to observe and assess the market more effectively and make a better-informed trading decision.

Overusing One Position 

A trader will become overexposed if they allocate too much capital to a certain market. Traders naturally feel even more overexposed if they think the market is going to keep rising. Although the larger the positions, the greater the profits in the right direction, it will also increase the risk to the position. Heavily investing in one asset is generally regarded as a bad trading strategy.

What Exactly Are Expert Advisors? And How Can They Help You Trade Smarter

An Expert Advisor refers to a software application that facilitates trade decisions in the forex market while additionally managing possible downside risks providing a precise trade decision about the pair that you mean to trade. Many kinds of software improve your quality of decision-making at various stages of the forex trade and generally improve your potential for profitability in these financial instruments.

They can help me continuously monitor the marketing and also set rules that trigger at certain points during the live trading sessions. It also allows you to back-test the strategies. 

The benefits of using the EAs to avoid loss are as follows

• It removes the emotional decision-making. All decisions are based on fact and information.
• The automatic risk management feature is there for every trade.
• You can scale and multitask at the same time and make a more profitable, informed decision.
• It also has AI features that help you make better trades during the trading sessions. 

Manual Trading vs. Automated Trading: Why EAs Have the Edge

In the tug of war of manual vs. automated trading, the latter gets the edge with its exceptional data computation capabilities. The table below perfectly captures the comparison between both and highlights why EAs could be your key to success in trading.

How to Effectively Use EAs for Your Trading Session?

• The first step is to educate yourself about anything you will be dealing with. So study and understand how everything works. This way, it will become easy for you to take trades. 
• EAs must be tested on paper trading first and then shifted to the main trading platform. 
• Do back testing with the help of data and match the results.
• Set a limit for the risk you can take on a single trade. This way, you will be able to manage the loss easily and effectively. 
• Have realistic expectations about the profits or situations that you will face during live trading. 
• Using a reputable and fast broker is important to avoid any delay in the process. 
• Monitor the whole process daily and learn to make many more refined decisions. 

Conclusion 

New trades have come to the market with false expectations related to earning a lot of money in one go. The market requires discipline, knowledge, and other things that are lacking in the newbies. With the involvement of the expert advisors, it has become an easy way for new traders to use the software and manage their trading process smoothly. Traders do not make emotional decisions, and EAs perform all the tasks easily and effectively. If you are looking to get your hands on the highest quality EAs, you can get them at the OnShoppie. It is a platform that provides high-quality EAs for different situations to make it easy for the traders. To get in touch, visit their official website and look for the software you need 

FAQs: Why Most New Traders Lose Money (and How EAs Can Help Prevent It)

1. Why do most new traders lose money in the first few months?
Most new traders lose money because they trade without a plan, rely on emotions, chase quick profits, and ignore risk management rules. Lack of backtesting and inconsistent discipline also push them toward early losses.

2. How can Expert Advisors (EAs) help reduce trading losses?
EAs remove emotional decision-making. They follow a fixed set of trading rules, manage risk automatically, and execute trades faster than humans. This helps traders avoid common mistakes like overtrading or entering late.

3. Are EAs suitable for complete beginners?
Yes. Beginners can benefit from EAs because they provide structure and discipline. As long as the EA comes with a verified strategy and proper risk settings, it can guide new traders toward more consistent results.

4. Will an EA guarantee profits?
No tool can guarantee profits. EAs improve consistency and reduce emotional errors, but market conditions can change. Profits depend on proper settings, risk control, and choosing a well-tested EA with a proven strategy.

5. How do I know if an EA is reliable?
Look for verified backtests, live trading results, user reviews, and transparent risk parameters. Reliable EAs show steady performance, avoid unrealistic profit claims, and have clear stop-loss and money management rules.

6. Do EAs replace manual trading completely?
Not always. Many traders blend both. EAs handle repetitive tasks and busy market hours, while traders manage strategy updates or news-based decisions. It’s a balance that allows more control with less stress.

7. How do EAs help control emotions while trading?
EAs stick to rules no matter what. They don’t panic, get greedy, or hesitate. By automating decisions, they keep you disciplined, which helps reduce the emotional mistakes that cause most trader losses.