Why do most of the traders lose money in the stock market?
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Why 90% of the traders Lose Money in Stock Market
The article speaks about the various factors that need to be borne in mind before starting your trading in stock market.
It has been a record fact that about 90 percent of the traders lose their money in the stock market.
Below lines help you to explore the various factors that can enable you in stopping the impending losses in the stock market.
Why traders lose money in stock market
Most of the beginner traders in stock market are losing money and thus leading to frustration, pain and anguish.
Stock markets have different segments of trading that allow traders to trade in their specific area of interests. These segments are Intraday trading, options trade, and foreign exchange trade.
If you enter into any of these segments you will need a better understanding of the trading concepts to make money. Experts relate the percentage of traders having incurred financial loss is about 90 percent at the stock market.
Believe in Knowledge based Culture:
Stock market experts do advise new investors to get knowledge on the prevailing market conditions, factors that influence the price variations.
Before you plunge into stock markets to earn money you must have a perfect layout that defines in the following lines. You must define your risk tolerance, trading cycles, investment goals, etc.
Lack of wisdom causes mistakes and the probability of making profits on stocks can reduce considerably. To make profits in good proportion, you are recommended to undergo essential education and training.
You can improvise your educational and training skills by seeking information from books, seminars, course participation, and essential tips from the stock experts desk.
Online free resources, articles, videos and forums can serve to be absolutely informative. Exchange of opinions, and query posting can enrich your knowledge.
Beginner traders must experience a real time analysis by employing paper trading and back testing. You can gain virtual experience by employing your tasks to specially designed software tools.
Emotional Trading:
Market volatility can shake your emotions and draw you into hasty actions that result in heavy losses.
To keep up in pace with the stock market fluctuations you need to be objective oriented and remain disciplined when participating in trades.
Greed can pull you into swamp which means you may get charged up to play high risks and attempt to fulfil your irrational financial gains. In stock trades you will have to balance hope and regret in a skillful manner.
Being excessively hopeful can make you hold positions for a time that may cause damage to your underlying assets. Similarly, a wild guess can eject your profitable levels and you will have skipped opportunities in buying or selling the good stocks.
Alternate means to regulate your stock business when you get inclined to emotional trading. You must utilise the stock trading features established by the stock markets (BSE, NSE)
For instance, you must adopt stop loss to staple the financial loss component, Strike price is to define your urge to sell stocks. If you focus on the long term goals of trading strategy then your trading decisions will be more sturdy.
Traders’ Risk Management Control
You must lay out a clear cut plan that limits you from trading excessively and set goals for good returns before initiating the trading.
You must retain a conscious effort in setting limits that can manage the risk. You will have to set stop loss orders to limit losses, spread risk through the diversification of positions and never trade beyond your position sizing limits.
Avoid Over-trading:
Overtrading can be due to your participation in too many, often coupled with emotions or impulsive nature. Hence it is always suggestive to never cross your planned strategy.
If you perform overtrading, you will have to bear the high trading cost, slippage cost, missed opportunities, and even cause lack of focus and direction.
Applying Wrong Trading Strategy:
First, every investor has a unique personality, and can feel comforted only when you establish a specific goal set.
Second, adaptability to change is the key feature in stock trading and you must transform your strategies in accordance to market conditions and real-time experiences.
Third, you must maintain a great degree of understanding on your personal preferences and then apply the trading strategy. Be mindful, every chosen strategy may not be suitable in earning your predetermined goal set.
Fourth, you must adopt risk tolerance, screen time availability, and market talk and its sentiments.
Fifth, depending on your objectives, you must prefer intraday trading, long term investing or swing trading. Your choice of strategy should obtain results that match your investment goals.
From the concluding lines you must understand that you should never move in haste until or unless you haven’t chalked a clear cut trading strategy.