Stock trading is considered an attractive option to make easy money.
So what, Unfortunately, most traders have lost money. What could be the reason behind this?
So what, Unfortunately, most traders have lost money. What could be the reason behind this?
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| Why do Most Stock Market Traders fail to Make Money in Stock Trading? |
Why do most stock market traders fail to make money in stock trading?
Here are some reasons.
Poor emotional subjects
If you thought that trading is about high intelligence quotes (intelligence), think again! Many funds run by managers who graduated from IVY League colleges have failed. What could be the reason? Poor management of emotions is one of the major reasons for traders to lose money. Veteran Wall Street businessman Victor Sperando commented, "The key to trading success is emotional discipline. If intelligence had been dominant, many people would have done currency trading.
Greed, fear, and nervousness are some of the negative emotions that affect traders. Greed causes traders to take a position without understanding the risk-reward ratio. Due to fear and panic traders have to stop their positions when the stop loss is not hit or when there is a huge fall in the market. Even immature euphemisms occur during a time when trades are making good money.
Leveraged bets
Many merchants take loans to fund their positions. When a particular part of this loan or debt has to be repaid, they are forced to separate their position at that point in time.
In many cases, these are disadvantageous locations. Thus, their businesses are affected when their debt is to be repaid rather than trading strategies.
The magnitude of the loss can be very large if the product itself is beneficial - derivative products such as futures and options. Double exposure to debt with leveraged products leads to disaster. Long-term capital management, which has lost $ 4.6 billion less than four months after the 1997 Asian Financial Crisis and the 1998 Russian Financial Crisis, is a testimony to the loss of high financial gains.
Attached to its position
Some traders, especially amateurs, do not have a stop loss, which can be suicidal. Some traders do not exit their position even when the stop loss is affected. They become emotionally attached to their situation and lose their impartiality and rationality in the vain hope that the business will make money. More often than not, it is not. Thus there are significant disadvantages. This lack of systematic processes or an inability to stick to a process is the main reason that traders are short of money.
Some people love or hate special stocks that prevent them from being dispensed. For example, if a trader loves Reliance Industries, he can trade in Reliance stock even if better opportunities are available.
Trying to make a quick buck
There are many students who fall into the greed of businesses who are fascinated by quick bucks. The same happens with many employees who do business during office hours when they are independent. They run on some trades where they earn quick money through good luck without any strategy. They believe that they have learned the art of trade. Overconfidence bias leads them to increase the size of the situation and then the shock comes! The next few trades may go against them and they lose large sums of money. There is a saying in the business community - beginners make profits and talk about them. Professionals try to limit their losses.
Do not control your speculative trend
Once a person gets into the habit of doing business, there is a tendency to trade excessively even when good opportunities are not available. Imagine people whose business practices are similar to alcoholics, casino gamblers or drug addicts! This type of behavior causes harm. This compulsive habit wreaks havoc not only on their money but also on their lives - sometimes leading to health and psychological problems.
All traders are bound to make losses in some of their trades. There is trust among unsuccessful traders - I will recover my previous losses from my current trade. Thus, instead of focusing on current business, the focus is on past losses. The burden of past losses is so heavy that it affects their rational thinking. They fail to recognize that every trade is independent.
Amateur businessman
Many traders make good money at Bull Run - and think they know it all. Usually, during such periods, they can make more profit than experts. But, what happens when the tide turns and the pattern that repeats itself for months or years changes? We witnessed the crash of 2008, where traders lost huge sums and some traders and institutions were wiped out.
Here are some reasons.
Poor emotional subjects
If you thought that trading is about high intelligence quotes (intelligence), think again! Many funds run by managers who graduated from IVY League colleges have failed. What could be the reason? Poor management of emotions is one of the major reasons for traders to lose money. Veteran Wall Street businessman Victor Sperando commented, "The key to trading success is emotional discipline. If intelligence had been dominant, many people would have done currency trading.
Greed, fear, and nervousness are some of the negative emotions that affect traders. Greed causes traders to take a position without understanding the risk-reward ratio. Due to fear and panic traders have to stop their positions when the stop loss is not hit or when there is a huge fall in the market. Even immature euphemisms occur during a time when trades are making good money.
Leveraged bets
Many merchants take loans to fund their positions. When a particular part of this loan or debt has to be repaid, they are forced to separate their position at that point in time.
In many cases, these are disadvantageous locations. Thus, their businesses are affected when their debt is to be repaid rather than trading strategies.
The magnitude of the loss can be very large if the product itself is beneficial - derivative products such as futures and options. Double exposure to debt with leveraged products leads to disaster. Long-term capital management, which has lost $ 4.6 billion less than four months after the 1997 Asian Financial Crisis and the 1998 Russian Financial Crisis, is a testimony to the loss of high financial gains.
Attached to its position
Some traders, especially amateurs, do not have a stop loss, which can be suicidal. Some traders do not exit their position even when the stop loss is affected. They become emotionally attached to their situation and lose their impartiality and rationality in the vain hope that the business will make money. More often than not, it is not. Thus there are significant disadvantages. This lack of systematic processes or an inability to stick to a process is the main reason that traders are short of money.
Some people love or hate special stocks that prevent them from being dispensed. For example, if a trader loves Reliance Industries, he can trade in Reliance stock even if better opportunities are available.
Trying to make a quick buck
There are many students who fall into the greed of businesses who are fascinated by quick bucks. The same happens with many employees who do business during office hours when they are independent. They run on some trades where they earn quick money through good luck without any strategy. They believe that they have learned the art of trade. Overconfidence bias leads them to increase the size of the situation and then the shock comes! The next few trades may go against them and they lose large sums of money. There is a saying in the business community - beginners make profits and talk about them. Professionals try to limit their losses.
Do not control your speculative trend
Once a person gets into the habit of doing business, there is a tendency to trade excessively even when good opportunities are not available. Imagine people whose business practices are similar to alcoholics, casino gamblers or drug addicts! This type of behavior causes harm. This compulsive habit wreaks havoc not only on their money but also on their lives - sometimes leading to health and psychological problems.
All traders are bound to make losses in some of their trades. There is trust among unsuccessful traders - I will recover my previous losses from my current trade. Thus, instead of focusing on current business, the focus is on past losses. The burden of past losses is so heavy that it affects their rational thinking. They fail to recognize that every trade is independent.
Amateur businessman
Many traders make good money at Bull Run - and think they know it all. Usually, during such periods, they can make more profit than experts. But, what happens when the tide turns and the pattern that repeats itself for months or years changes? We witnessed the crash of 2008, where traders lost huge sums and some traders and institutions were wiped out.
In some situations, they are incorrectly considered the opposite. When something has happened for a long time, they irrationally believe that the trend will be reversed - resulting in huge losses again.
Other reason
Some traders sell their winners at a much higher rate than the losers. This means less profit from the winners and more losses from the losers. In some rare cases, some operational mistakes such as keying in the wrong order (adding another zero in a leveraged state) and unfortunately causing business losses against you. Some mistakes, such as not accounting for transaction costs, such as broking charges or tax implications when developing trading strategies, also result in losses.
Understanding these simple reasons while trading will help many traders not to lose money. As stock trader Bernard Baruch said, "In trading / investing, it's not about how much you make, but how much you lose."
Other reason
Some traders sell their winners at a much higher rate than the losers. This means less profit from the winners and more losses from the losers. In some rare cases, some operational mistakes such as keying in the wrong order (adding another zero in a leveraged state) and unfortunately causing business losses against you. Some mistakes, such as not accounting for transaction costs, such as broking charges or tax implications when developing trading strategies, also result in losses.
Understanding these simple reasons while trading will help many traders not to lose money. As stock trader Bernard Baruch said, "In trading / investing, it's not about how much you make, but how much you lose."
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