Why do 90% of traders lose money in the stock market?
The stock market is one of the legit sources of income provided if you know how to trade. But nowadays people just enter into the stock market because they find it cool to tell people they are a “TRADER”. so let us look at the mistakes done by the 90% of the traders who newly enter to the markets which result in them in suffering losses and they start to believe that trading is some sort of gambling.
So first of all let me clear this part for you that trading is not a type of gambling (as said by some people). It is a skill you master only when you learn and apply it consistently. The problem with the people who think it is gambling is that they all want to get rich quick schemes which they want to happen overnight which is not possible in trading. Becoming a trader is not a process, it is a journey and it will take time.
Lack of Proper Knowledge- well, as I mentioned earlier people want to get rich quick schemes. So rather than learning how to trade they open a Demat account with a broker, watch a couple of YouTube strategies, and directly enter the market with real money and end up blowing their whole account and these are the same people who spread the message that trading is gambling.
Relying on Tips- this is happening a lot these days. There are people who call themselves ‘stock market gurus’ who provide daily tips for you to buy or sell a particular security. Well if you are one of those people who are dependent on these gurus then you should quit trading because if you don’t have the confidence to analyze and take trades all by yourself then trading is not your cup of tea for the long run.
Lack of Patience- if you have been trading in stock markets for a while, then you should have understood by now that it is all about patience because you have to wait for your stock to reach your desired price level to place a buy/sell order. It is said that patience is the name of the game and considering the stock market you will need a heck of a lot of patience. Try meditating before the market opening it helps a lot in coping with stress and FOMO.
Emotional Trading- it is often seen that traders who suffer loss try to recover the loss on the same day and end up losing more money. The one thing you need to understand is that emotions always clouds your judgment. So whether it is the stock market or any other case in your life you should never take important decisions emotionally. And as far as the stock market is concerned you should kill your emotions otherwise you won’t be able to trade logically. If you make a loss, just accept it and watch the markets and try to figure out what went wrong but don’t do overtrading in lieu of recovering your loss.
Not Understanding Risk Management- risk management is something that will help you in the long run if you want to take trading as a full-time career. It is the most important skill that a trader needs to understand but many ignore it. It includes the decisions related to the amount of capital to be invested and the quantity or lot size to be purchased/sold. As we all know that in trading no strategy is 100% accurate but understanding risk management will help us to minimize the losses.