Data shows 90 percent of traders loose 80 to 90 percent of share their capital within 3 months time period. We often think stock market is easy money making tool. If you are thinking in the similar way, you need corrections in your thought process. Let us share with you couple of highlighted on things you must keep in mind when you are in the stock market trading in intra or long.
- Having very high expectation about the market: People have very high expectation about the market, they start hearing success stories, like someone became rich overnight. They might have friend making consistent profit
- You don’t have a trading plan: Benjamin Franklin said – if you fail to plan then you are planning for failure. Most of the traders including us were not having initial trading plan which had caused major failures in the stock market. To be successful in trading you need to have a trading plan. That trading plan must have proper setup, proper risk management, proper money management, You need to know were you are going to enter, where you are going to make exit, where you will be placing your stop loss. All of these aspects is very important in the market.
- Not back tested the trading plan: You have trading plan, entry, stop loss, money management, risk management. But have you checked your plan with the historical data. Do you know how many trades you will win, how many trades you will loose. On an average how much money can you make. It is therefore very important that you back test your trading plan before you use it in the live market. You can do paper trading and back test you plan before entering in the live market repeatedly. This will remove trading hesitation from your mind and you will then be trading in the live market with higher confidence.
- Trading with emotion: Emotion is the biggest reason why people loose money in the market. The main reason why people get emotional while trading is because they don’t have the trading plan and they have not back tested their plans. If you have a proper plan automatically your emotions will be in control and you will be making less mistakes. Or else when you are in the trading market things like fear, emotions, frustration, greed all of these kind of things will come into you and therefore you will not be able to concentrate on your trading. Due to this you will often start over trading, think more about higher margins specially when you have lost money there, stocks which may can give you higher profits you will exit before time as you are scared that you may loose the money. All such things will lead you to failure.
- Trading with ego: Remember market is always right. When you see that your analysis and predictions are going reverse of what market is saying, the first thing you should do it go ahead and cut your losses and exit your trade as fast as you can. If you don’t do that and think that your ego is grater than the market, you will loose your money for sure.
- Lack of education: It takes you years of practice for you to become expert in any domain. Trading is no different, if you want to be an expert in trading and want to make consistent money then you need to spend enough time in trading charts, learning new things and back testing your strategies. If you don’t do this you will keep lot of money in the stock market. Lets say someone has a heart surgery, so to do a heart surgery will you prefer an expert doctor or someone on you tube saying that try x, y and z things. You must therefore educate your self enough before entering the live market.
- Starting journey with very less capital: People who start their journey with very less capital often want to grow their capital very fast. Due to this you start over trading, taking high risk at higher levels. All of these things will happen. Because of this you will loose your money quickly. There is nothing wrong in starting with small amount, but then you must also remember you must give yourself enough time to grow the capital. In order for your account be sizeable, you need to have more patience than others. First you need to learn with your small capital then grow your capital and then you can take better trades.
- Buy and follow signals: There is nothing called easy money in the market. If you want to be successful in the trading market you need to learn, you need to have a trading plan all of these things. People who don’t have enough time for the market think its okay to follow signals or follow the the inputs other are giving them. There are lot of tips and tricks circulated online, blindly following all such tips is one of the biggest mistake you are making, before implementing others tips you must evaluate the success and failure rate of all such guidance. If you want to be successful in the stocks you should spend time reading charts, analyzing patterns, building strategies all of such things. If you just think taking tips from someone will help you, its really going to be very difficult. We will therefore recommend you to start with the basics, learn slowly and within few years you will be a successful trader.
- Overloading the chart with lot of indicators: Indicators are good, but then having one or two are more than enough. If you fill your chart with lot of indicators and try to get signals from each of them you probably get confused in the process and will make more mistakes. Sooner or later you will realize that looking at less things gives more clarity than having too much on the table.