The Science Behind Why Day Traders Fail... (Dunning-Kruger Effect)
ฝัง
- เผยแพร่เมื่อ 3 มิ.ย. 2024
- Let's talk some science. Not just any old science, but literally award winning science in the field of psychology and human behavior. I have been guiding and helping traders since 2013 and I've seen some very common traits pop up time and time again. Until now, I've never really had an exact explanation of why beginner traders who are just getting started behave the way they do, but... now I do! I want to share with you what is known as the Dunning-Kruger Effect. When you understand even just the broad idea of the effect, you can quickly see how it explains why so many day traders fail. The stock market and being a day trader is already hard enough; however, when you introduce in this award winning psychology, you can see why it becomes that much more difficult leading day trader to ultimately fail. I realize that these kinds of videos can come across as "being a hater" or "being negative", but please watch this will full self awareness and an open mind. Per the research, if you are honest with yourself, you will probably begin to understand why and how this psychology is affecting your trading. Let's learn not with opinions, but some award winning science.
Learn More About the Dunning-Kruger Effect: www.psychologytoday.com/us/ba...
This Free Event Reveals: How I transformed myself from an employee to my own boss (and how you can too, even with no experience!). Register: claytrader.com/1-hour-trader-...
Enjoy this Free Content? I'm confident you'd enjoy my premium training courses then: claytrader.com/training/?utm_...
Hear real-life trading journeys from "normal" people: The Stock Trading Reality Podcast - claytrader.com/podcast/?...
Pick up some ClayTrader gear at daytradergear.com/?...
![[LIVE] Day Trading | I Tried Trading Options (oh boy...)](http://i.ytimg.com/vi/0STDtCx8DkA/mqdefault.jpg)
![[LIVE] Day Trading | I Tried Trading Options (oh boy...)](/img/tr.png)
this has to be one of my most favorite videos. I need to watch this whenever I lose a trade.
Glad it could help!
Congrats Clay! Those are such difficult concepts to cover and you did a great job. The market can be so counterintuitive, rewarding good and bad, becoming such a trap.
Thanks for watching!
One of my favorite videos! Quit apologizing for the theory. That's what we need!!! Thanks again Clay. Keep working on those biceps!
Glad you enjoyed it
Nick C You don’t come out as very informed in your reply either. Sure, none of those tools are the end-all-be-all of trading, and all the tools in the world will be worthless in the hands of someone who does not know how to use them. But all the tools you mention can be very useful in helping to build a picture of the market that allows you to making a trading decision, and in fact many expert professionals use those tools in their decision-making.
@@cools6560 you have good points. AI is coming bigger and better as well. they'll factor in these lagging indicators to kick human asses...NO EMOTION.
@@cools6560 Yes, too much clutter on the screens that all say much the same thing, so you miss opportunities.
@@cools6560 by "auctioning of price" are you referring to level 2? I'm just curious, still have a lot to learn.
Psychology is the main focus for some time now. Such a challenge! Emotions are so difficult to control! All great points! I will study this Dunning-Krueger Effect. Thank you!
Absolutely!!
honestly, i started trading and learning and indulging myself in this world of trading about 5 months ago and ive been watching you for the last 3..
this is the one video that made me sub, youre awesome man. appreciate these kinds of videos!
Glad to hear it!
Why u stopped creating music
@@AnmolShelke I didnt.. Album dropping soon.. Music video too ❤ go subscribe! Love yaa
You're the most coherent and logical trader I know, Clay! Thank you for your content!
I appreciate that!
Literally did this today and yesterday. But my risk management saved me. The lesson I thought I learned you just destroyed (wait and it'll rise) and a much better lesson I never even saw be more patient and calculated with my entries. Thank you Clay!
Glad it could help
Excellent stuff - exactly what we traders want to hear - informative and concise
*this
I lacked better words to express the same sentiment, so I'm seconding your comment my indian friend
@@p0ln how did you figure out I am Indian
@@realdaybreaker8013 ok, I could joke and say that my spidey senses were tingling and I knew you hated the CCP, thus you a pajeet-
but even as a paddy, I have standards ;)
normally I wouldn't check, but the two words I wanted to use, were in your comment. there were only two other comments
so I thought to myself, this chap has higher english, so you hit my interest , you have your location set as India
@@p0ln didnt know my location is being displayed - was it in the ABOUT tab?
@@realdaybreaker8013 yes
Great video. People often forget that trading is a battle again other people and which means psychologically is a really tough battle and the worst enemy is yourself and learning to deal with you emotions is the key point to success.
Well said!
This is me 100%. Thank you for posting, glad I found your channel!
Glad it was helpful!
Really great, explains so much, so simply. Thank you.
Glad it was helpful!
Awesome video Clay! The video says exactly what we need to hear!
Glad it was helpful!
This was a great video Clay. Good job man
Glad you enjoyed it
I think you do an absolute great job teaching and enjoy watching.
I appreciate that!
Oh my god. I Googled "Why I am failing in Intraday trading everyday" literally 10 hours ago. I am not kidding.
lol we've all been there, its not failing if you're learning.
I hope this helped!
@@claytrader Oh yes. This definitely helped.
@@yogeshbadgire great!
@Smarter than you Fo sho if you're interested in "talking stocks/trading in general", that's the entire idea behind my private trading community (which you are welcomed to join) you can find it here claytrader.com/team/
Best video I've seen in a while...Connects a lot of dots for me in my Trading Journey...
Glad it could help!
Clay, no apologies needed. Great video! I am at the very bottom of the curve, crawling slowly upward and learning sound trading tactics. Taking baby steps and becoming profitable, much in part to your insights and videos. 1 year and 4 months in and finally getting consistent. Every day was a classroom and every trade a lesson. Early success created some bad habits... but I'm finally getting the strategy and plan on a healthy and profitable table. Thanks...
Cheers Terry!
Excellent video. Much thanks for sharing!
Glad you enjoyed it!
GREAT, GREAT, GREAT, lesson absolutely loved it!
Glad you liked it!
Good stuff Clay keep it up. I’m Already thinking about your next upload!! Love and Respect from 🇨🇦🇨🇦
Awesome! Thank you!
Clay this was amazing. I appreciate this and it's my story honestly.
Glad you enjoyed it!
Another great Video Clay, thank you.
Very welcome
Nice one Clay, really appreciate the video.
Glad you enjoyed it
Be humble and know what you dont know, thats the lesson of the day for me mate thank you very much.
Glad you enjoyed it
Great video man! I’ve absolutely been through the DK effect based on the info you’ve outlined. The tough part I think is knowing where you currently fall on this scale because there will always be some degree of “don’t know what you don’t know”. I’ve definitely been through that initial spike of confidence by being rewarded for my bad behavior in the stock market, and I imagine now that I’m finally beginning to turn the corner upwards again after being beat down as the chart displays lmao. Who can say?! Thanks for creating this video! It was very thought provoking!
Thanks for taking the time to share!
I didn't know the Dunning-Kruger Effect was a thing until this video popped up on my feed. I've been using this principle as an interview question in multiple jobs in the past..."How would you rate your _____ knowledge on a scale of 1-10", whenever I got a 8-10 I knew they didn't know what they didn't know.
The more I learn about trading the more I realize how much further I need to go.
P.S. I'm from GR too, I subbed to your channel and keep up the good work!
That is super interesting on your part! Thanks for sharing.
This is a great breakdown of why it pays to be scientific with protocols in place, no emotion. People think about money when they’re trading, money is very emotional, when they should be analyzing numbers, numbers are scientific, no feelings.
Well said!
Sometimes it's better to don't know what you don't know and let your confidence do the trade work, don't think too much about the things you've learned. The more you know the more work your brains need to do for the same result. Keeping it simple is the best method.
Thanks for the thoughts.
2.5 years in the market. Hey man you opened my eyes. Thank you so much man.
Glad it could help!
Thanks for giving me the perspective to look at myself honestly. For extreme insight watch this video! Ruminate with self reflectivity! Know thyself even... Self assessment or bust! This video is a must for all new traders!
Glad it was helpful!
Who knew! Thanks for helping us get past this crazy stuff!
Thanks for watching!
That effect is all over me. I can feel it. Thanks for the video.
Glad you enjoyed it!
Definitely going through this right now! I’m at a point where I’m starting to lose confidence and starting to realize wow I am totally doing a ton of things wrong, and there is really so so much things I still need to learn! It’s going to be interesting just going to take it day by day and keep a open mind to learning new things. Thanks for the video definitely woke me up a bit.
I'd encourage you to sign up for my (free) class I offer here claytrader.com/1-hour-trader-transformation/
@@claytrader sure I’ll check it out!
@@flippatheshippa cheers
excellent stuff consistently from this channel
Glad you enjoy it!
Wow... did you make this video for me? GREAT VIDEO!!!!
No, I made it for ME! lol
Awesome, thank you for this video. I'm new to this and I can see myself here. Again thank you for the easy explanation. Continue to do vide like this.
Glad it was helpful!
honest videos, tons of info and insight with no bs
I appreciate that.
Good video - just what is needed as a wakeup call!
Absolutely!
“A little knowledge is dangerous” is applicable in all areas in life, not just the areas listed in the DKE. To help the learning curve ...Noble effort in your presentation of the DKE however Nobel is pronounced Noh-Bel. Your shirt says it all about Day Trading. No Emotions. Best of knowledge to you. Watch out for “no nothing” 👍
Thanks for watching.
The example of the trader that lost 10% initially was a perfect explanation of this. Thank you.
Glad it was helpful!
This video is great and really shows how this craziness in the market can trick you into thinking your trading the right way. This volatility and influx of good and bad news is killing me so hard to judge this market and make solid trades atm. Thanks for the lesson!
Thanks for watching Charles!
This video is great! Looking back at it and reflecting, I made 100% of these mistakes, and I still do at times.
Good self awareness on your part!
I also recommend studying *the other* end of the DK effect. People with massive skills underestimating themselves, thinking that if "it" is easy for them then "it" is easy for others too.
Valid point
Where?
@@JohnSmith-zd9ou where what?
@@claytrader Where to go to study the other end of the DK effect? Is there another study or name for that? Thnx
@@JohnSmith-zd9ou not sure, hopefully that other person replies.
Definitely do more videos like this. Great content!
Thanks! Will do!
Great video. There is light at the end of the market tunnel.
Cheers
Good work. Advice to all traders keep a journal and write into it every trade and your rational and emotion both at the time and the end, even if its an embarrassing trade and you lost lots. This process is the foundation of progression as you grow, as this will allow you to have a basis to know where you have been and where you are heading. Every trader will fail in the beginning as do most businesses, trading is the same..it should and is fundamentally a businesses so treat it like one. You fail, you try again, you fail, you try again. If written, every failure is a learning curve ready for the next business. If not written then every failure is failure and you will inevitablly hate trading and move on with something else.
Thanks for the thoughts.
Thank you for your valuable knowledge
My pleasure
I have gone through this with the firearms safety thing. Trying to avoid the same with looking into day trading as a way to get away from 80 hr work weeks. This sum up so well why i have been binge watching all your videos. Thank you.
Cheers Eric!
one of the most useful video I watched on youtube yet
Thanks!
Good video Clay.
Glad you enjoyed it
This was definitely true for me. Was up 250%, then lost it to only being %+150% after 6 months of starting trading. After that I realized i'm doing something horribly wrong, so I started managing my risk to max loss of -1.00R. Since then, I have been doing much better, and been less overconfident. Dunning-Kruger in effect; I didnt know shit and made money, was too confident and risked too much, then restructured myself and started doing much better after lowered confidence, and started slowly building confidence overtime. Very helpful video, and very useful to pay attention to!
Thanks for watching and sharing your experience with it!
I am a Rookie Trader...This video is really helpful and everyone must watch it. Thank you.
Glad it was helpful!
It was amazing, Thank you!
Glad you enjoyed it!
I wish I could have seen this video a couple years ago, before getting most of the way through that curve slowly and painfully. Good job on your explanation.
Thanks for watching!
Would it have helped, though? I have known the Dunning-Kruger effect for years, even way before I ventured into trading, and I still went through all those stages.
@@yunoewig3095 good feedback!
Clay - I was a little Nervous - it was me you were going to use as your example - ugg.. :) Thanks for the Learning Lesson... I actually learned a hard lesson today - when your up - get out... LOL I waited thinking it was going to go up more - got stopped out.
Glad to help
Man, you have just nailed it. With that one
Thanks for watching!
Perfect! This effect has been around HOWEVER, I don't know many people who made the link to day trading. I had a 32day win streak and the moment I started to think. "I got the hang of this". I started to stray from what brought the streak. Took 2 losing days in a row after I made that statement. My solution, you have to have a mechanical system at first. Even more so, and Clay I know you can appreciate this as a former engineer. I have since developed a "STANDARD WORK" checklist before every trade. I've learned that the more you "know" the more you can't trust yourself to do the right thing.
Well said and thanks for sharing your experience!
Been trading since 17. Went from 6k to 50k . . currently. Had my best month ever. And decided to go take more risk and set me right back. Overall my risk management will make me a millionaire within 5 years . Compounding gains is the secret. Tortoise beats the hare EVERYTIME. Clay you Rock. Learned most my charting from your videos back in the day.
Great stuff - def relate!
Thanks for watching!
I'm so glad I watched this video. thank you :)
Glad it was helpful!
Brilliant video!
Thank you! Cheers!
Great information 👍
Glad it was helpful!
Love the psychology behind one hat your talking about keep it up love it
Thanks for the feedback.
Great video !
Glad you enjoyed it
Great video 👌 I am there right now thank you.
Glad I could help
This is amazing. This was me in the beginning. I wish I knew this before when I started
Same here!
It's something you have to learn the hard way
@@Sketches8 it really is..i did awesome on day trading in May, June, July then August and September happened and I lost 5k..going through the painful re assessment as we speak.
Thank you for your videos. I'm stuck in India with not a lot of money trying to get back to the US and trading seems to be the only option to me at this point to finance such a move when we can. I just want to make sure I'm doing this the right way. I'm studying as much as I can. Thank you
Best of luck!
Loved it. So true.
Thanks for watching
Well...no, I did not know this. Interesting. Thank you.
Interesting indeed!
Lesson learned: Be humble and listen to master traders. Thanks. Good piece.
Boom!
And glad you enjoyed them
@@wearewon cheers
I havent started trading yet, but I've been watching videos and reading lots, trying to learn about trading. This video was super important for me to see before I start diving into trading. Thanks Clay
Glad it was helpful!
Good video Clay
Glad you enjoyed it
Great video. Very informative.
Glad you enjoyed it!
@@claytrader I've started trading since last 3 months.. and watching this video feels like you could read my mind.. lol.. this will save me from making mistakes.
@@Yogeshgai you're not alone, we've all been there
From what I have heard, the market is always evolving, and even professional traders are constantly adjusting.
Kind of... but I mean "evolving" doesn't mean "new strategies", it just may mean using some strategies more often than others.
I'm battling through this right now. Good video! I'm well into the dip. lol
My problem right now is setting stops too tight and my stock picks never get a chance to go off on my swings. Almost all my stop triggers have exploded after it busted my stop. On the other hand, I use to watch stocks fall and loose quite a bit. Not giving up and videos like this help a lot. Thanks!
You got this!
Brilliant video and so true about trading. Even once you have all the knowledge you still need to find an edge suited to your cognitive skills and emotional strength. That's the hardest part about trading
Good thoughts!
Yes. Clay. In first year of my trading i was up $70,k. I thought I found my calling but i have lost for 6 years try to learn. I have lost more than $150k. But finally after 6 years of not quitting my full time job and part time trading. I made that all back and more.
congrats!!!
good stuff as usual. cheers
Thanks for the visit
Love these types of videos!
Glad you like them!
Good point !!
Thanks!
I Learned a lot and enjoyed! thanks man! you should do a video explaining when to cut your losses and when to hold. It seems like there's been a lot of bears taking advantage of newer traders lately
Thanks for suggestion! Those videos already all exist here claytrader.com/takecontrol
@@claytrader oh I didn't realize, I'll check them out!
@@brendenhurlbert7 great
Nothing has been for truthful than this!!!
Thanks for watching.
7:34 had me lmao!! brought me back to the old days fr 🤣🤣
:-)
Best video, thank for yr explanation
Glad it was helpful!
@@claytrader thank you
@@TradingGold you're welcome!
Shared to many friends.
Thanks!
@@claytrader rewatching this original video really helps humble me down when i have a green day or a Big green day.
@@claytrader i need to be reminded that i still can learn more. making money dont mean iam good.
@@aceliu5997 cheers!
The same thing happened to me (around 10% drop and then raises to 11%) and I thought I'm super intelligent because of my patience. But now I feel like its just some luck and I need to manage Stop Loss which I'm not using as of now. Thanks so much for this. This helped.
Glad it could help!
Thank You Man👍🏼 My Take Away 🚶🏾 Stay Humble And Build Little By Little
Always!
Very helpful video
Glad it was helpful!
Thank you!
You're welcome!
Really good video even for pro traders!
Thanks for watching!
Perfect. I've experienced this.
We all have, if we're being honest with ourselves...
Good stuff!
Glad you enjoyed it
Thank you sir
Thanks for watching!
Great Video!!! I've felt the DKE!!!!
You and me both!
Awesome knowledge here ! stop losses set to 2% !
2%? hmmmm
Very good content
Thanks for watching.
Great video, dunning kruger is not just about trading, but also in life.
The worst part about dunning kruger effect is that if people lack the self awareness and age over the years, they start to form cognitive bias. Meaning they have been wrong for many years, and the longer the years goes by the more they are insistent they are right.
Well said.
Reminds me of religion
Learned about the D-K effect in college. I have had a decent understanding of the concept at least i think. Guess how i always shoot myself in the foot? I grind up for a month-2 months. I Increase my position sizes, and lose too much money. Needed to hear this vid. I guess you don’t know what you know sometimes too. Time to subscribe
Welcome to the channel!
Brilliant!
Thanks for watching!
Awesome 💪🏼
Thanks! 😁
Bottom of your chart says (no nothing)
Thanks for the video, I KNOW much more now. Thank you!!
Do you get the irony of it?
He also spelled "knowledge" so obviously he did it on purpose...
@@melissamiller4010 :-)