Loss In Trading
The statistical information states around 95% of traders loss in trading or only a few percent of traders make a living at it. Inadequate trading discipline is the primary reason for the losses, including poor money handling, hard time, or a poor tactic.
Traders lose discipline emotionally; Anger and obstruction following losses/ miserable trading can be risky. Endorsing losses and dealing with them successfully is key to disciplined trading.
Causes Of Major Losses In Trading:
- Insufficient capitalization
- Trading Addiction
- Not Adapting to the Market Conditions
- Not Having or Not Following a Trading Plan
- Poor Risk Management
- Unrealistic Expectations
- Too much hope for a reversal
- Selling short in an uptrend
- Buying in a downtrend
Don't Cry Over Split Milk(trading losses)
Go Find Another Cow(trade)
Every trader has strengths and weakness. Some are good holders of winners but may hold their losers a little too long. Others may cut their winners a little short but are quick to take their losses. As long as you stick to your own style, you get the good and bad in your own approach.
Factors most people lose money in stock market:
· Insufficient research and making an investment based on ‘TIPS’
Now, let’s come to the guidelines from the fellow and coworkers. There is couple of things that a newbie should understand that nobody is going to tell them. Initially, all your friends will always show off about their financial gain & payoff. Second, none of your investor friends will inform you about their losses and poor investments. It’s sometimes a matter of honor. Overall, you will think that your friends or colleagues are always doing fine, but they are not. You might take their indication thinking that they have investigated a lot about that company and they are always right in investing. However, in the end, you will end up wasting your money.
·Trying to make money instantly
This is the second worst mistake that people make while investing in stock market. People are always in a rush to make money. They always want to become wealthy instantly. Successful outcome in stock market require time and patience.
· Rapid disclosure to market and non-diversification
The point is, you can enter stock market at any moment you want; nevertheless, to get in the market without prepared it totally stupid. Think of this like going to the forest without knowing how to hunt. You need to improve the art first. You need to figure out the market and enter once you are at least a little trained. In addition, non-proliferation is also one of the biggest mistakes that most fellows do. People are so optimistic about their stocks that they think it’s unjustifiable to invest in several stocks which may average out the profits. True, it might average out the profits; but it also makes it possible to reduce the risk. Remember, it’s always about keep to a minimum risk and make the most the profits. Like over-diversification minimizes the profits, in the same way, non-diversification maximizes the threat.
· Holding onto losses while booking profits early
Just imagine you have bought 5 shares. Three of them are doing well, while two of them are poor performance. What will you do? What will you sell first? The shares that are doing great or the one which is defeating?
‘Sell the winners and hand on to the loser stocks’. The majority of the nonprofessional investors follow this rule. People think that it’s risk-free to sell the stocks first which are giving them good earnings and hold the loser stocks. In this way, the loser stocks will get time to improve and they might get their initial investment back. Moreover, in the in the meantime, they can get some profits by selling their good stocks.
Despite that, this is the wrong methodology. In this way, you are restricting your upper level and increasing your reduction level. That is, you are constraining how much you can get profits as you have already sold your good stocks. But, you can go through even great loss as the loser stocks are still in your portfolio.
If you want not to lose money in the stock market, then you should follow the opposite approach. You should limit your lower level and maximize your upper lever. This can be accomplished by holding to your winners and freezing your loser stocks.
·Lack of patience
Patience is essential to success in stock market. The only thing that you need to do in the stock market is to buy best stocks and give it time. This is the only way to make more money.
Despite that, most people who lose money in the stock market do not have patience. Although many of these people are able to find a good stock, they aren’t able to get good profits from them. This is because they don’t have patience. They can’t even give couple of year’s time to their stocks to grow. They want a quick result.
On the other hand, this is not the only problem with such investors. In some situations when their stocks lose 20-30% of its worth, they become highly short-tempered and sell their stock quickly. If just they have held their stocks for 2 to 3 of months, they could have got good returns of around 40-50% on their investments. Here, the lack of patience goes wrong on their intelligence of choosing a decent stock.
·Uncritically following the flock
If you blindly follow everyone and buy that stock, then you are most likely to waste money. Everyone has some plans and tactics for their investment. You just can’t read the exit strategy of your next door neighbor. Maybe when you thought to buy, he was planning to sell the stock in a few days thinking it as overpriced. But you just can’t know this.
By just going through the company’s underlying principles and its financial reports you can figure out the reason why it is in news so much. And upon studying the company completely, if you are convinced, then you may invest in that stock. NEVER INVEST BLINDLY FOLLOWING THE CROWD.
“There Is A Time To GO LONG,
A Time To GO SHORT
And A Time To GO FINISHING.”
Stop watching the market so closely. You’ll only end up trading too much, which is risky and/or close good positions too early. Either way, you’ll lose money.
Steps To Prevent The Loss In Trading:
Before you get into trading, you need to figure out a number of theoretical and practical ideas on the market. Learning terms, instructional materials and get to know the strategy. Many power sources will quickly become your trading Bible because it comprises the necessary ingredients in one place – you just need to make sure you read it.
- Put in the context
International politics have a huge impact on the market, so you can not miss the news if you want to make the trade. Today, the key issues are the worsening relationship between the China and US and the growing influence of Russia, but on a local scale, in the UK, Brexit is the biggest event that may affect. Former Prime Minister Theresa May held a speech here in Grimsby earlier this year. This is the kind of event that could furnish very important – pay attention to the facts, but also for once and you will be best placed to stay in profit.
- Test your ideas into practice
The easiest way to get the wisdom necessary to flourish in trading but without endangering your capital is with a practice account. They are not just for newbie traders, Use a practice account to test new technique and tactics that can minimize your losses. You can then apply the most beneficial strategy in your live account and just reject those who fail.
- Always set a stop loss
You need to think in advance in the trading. Before anything had a chance to go improper, you have to fix a stop loss on your account. Consider it as trading with the safety on, every occasion. Of course, you will be enforced to take a chance when trading, but they may also be controlled risks. With a stop loss, it will out of the question to lose more than you are willing to be tested and safe play as often route to a big win on the track.
There are a variety of strategies and methods that can be used in the trading. And the most online platform also offers technical survey tools that may prove useful.
But you have to utilize one at a time, no matter how attractive it may be to do otherwise. If you use two oscillators or two indicators of instability at the same time, they will not be efficient because they would make another one excessive and could give the opposite signal.
Keep each and everything simple and use a practice account to test new strategies and kit. And always try to generate every forecasting on your own and always remember don’t let your emotions carry you away. Subsequently, if you can’t get a stay strong on your emotions then use tools or software trading.
If you implement these five steps, you will considerably lower your chances of large-scale losses and will be well on the way to turn a considerable profit.