Anecdotal evidence and behavioral finance research suggest that a large majority of retail traders—potentially 70% to 90%—abandon their strategies prematurely, often during drawdowns.
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A growing body of behavioral finance research, combined with extensive anecdotal evidence from trading communities and brokerage data, indicates that a significant majority of retail traders—estimated to be between 70% and 90%—tend to abandon their trading strategies prematurely.
This often occurs during periods of drawdown or temporary underperformance, when emotional stress, fear of further losses, and lack of confidence override disciplined decision-making.
Rather than sticking to a well-tested plan, many traders succumb to short-term pain and exit their positions or shift strategies altogether, frequently just before performance rebounds.
Key Supporting Insights
1. Behavioral Finance Findings:
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Loss aversion: Traders feel the pain of losses roughly twice as strongly as the pleasure of gains (Kahneman & Tversky). This leads many to abandon sound strategies during natural, expected drawdowns.
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Recency bias: Traders overweight recent performance and forget long-term edge.
2. Industry Observations:
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Many prop firms and experienced mentors report that most traders fail not because their strategies don’t work, but because they don’t stick with them long enough to see the edge play out.
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In various trading communities and education services, it’s commonly observed that over 80% of new traders give up within the first year, usually during a tough streak, even if their system is statistically sound.
3. Psychological Pressure During Drawdowns:
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Traders often:
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Misjudge normal drawdowns as system failure.
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Jump to new strategies (“system hopping”).
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Quit due to emotional exhaustion.
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Conclusions
An estimated 70–90% of traders quit or change their strategy during a drawdown, even when the system statistically remains profitable.
Good Luck Trading,
Russell
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