Trading has gained so much popularity here in the Philippines. As technology advancement continues to develop, trading has been very famous especially for those people who are into making money online. Trading seems very easy but actually, it is not. It requires a lot of patience and discipline to be a successful trader. It is for the people who are willing to take risks to be able to earn. Since it involves money without any assurance of getting it back. Most of the time, newbies are the ones who usually lose from trading and there are so many reasons why newbies lose from trading.
There are so many newbies who entered the trading industry thinking that they can get rich quickly by trading stocks. But unfortunately, they end up losing their money.
The truth is every investor experiences losing money at some point because that is unavoidable. Especially if you don’t know how to trade properly. You will lose money frequently until there’s no more left in your investment capital. So if you wanted to be successful in trading it is important that you protect your investment capital. You should understand the risk and you should know how to manage your money so you don’t lose frequently.
If you wanted to know the reasons why newbies lose money from trading, here is it.
Here are the Reasons Why Newbies Lose from Trading:
Insufficient knowledge about trading
Many newbie investors are thinking that trading is easy, but it is not. For you to become a successful trader, you must know a lot of things about trading. You must develop your fundamental and technical skills about trading because it will help you know what factors affect the stock market, determine the price trend by checking the charts and whether the stock is cheap or expensive. That is very important information you must know, because if you don’t know that, you will not be able to identify at what particular price you should buy or sell a stock.
Failure to develop a trading plan
As an investor, it is very important that you create a plan. If you have a plan you will be able to identify the returns that you expect to make and how long it will take for you to achieve it. In addition, you will be able differentiate your long-term and short term strategies and goals. Whether you wanted to buy stocks for short-term trading purposes or you wanted to hold it for long term. To simplify, having a trading plan will help you determine your objectives.
Can’t manage emotions
This is one of the main reason why some newbie lose money from trading. They can’t manage or control their emotions so they tend to do impulsive trading. If you enter trading industry, you must expect that you will feel greed and fear emotions. That two emotion are acceptable however, you must know how to control it correctly. Because if not you will end up losing your trade frequently.
Failure to take the profits on good trades
It is very satisfying to see your portfolio every day that your trade is winning and you’re gaining profit. Many first-timers think that if the trade is showing gains, that is already their money, but it’s not. Your trade gain is not yet your money, you should sell your stock first before you claim it as yours because if you don’t sell it there’s still a chance that you lose it, if the stock reverses. So if you already achieved your objective, you may consider selling your stock to make sure you get your profit.
Failure to cut losses on bad trades
Losing is part of trading. Every investor experience losing at some point. But, you should know when to stop if you’re already losing. If you think that the stock will continue to fall, you may consider cutting your loses. If you cut your losses earlier, there’s a good chance that you can recover your capital. Some preferred to wait until they recover their losses but that is very risky because you will risk losing more which make it harder for you to recover.
To sum it up, here are the things you should do to be successful in trading:
- Always use a trading plan
- Treat trading like a business
- Protect your capital
- Study markets
- Risk only what you can afford
- Know when to stop
- Always use a stop loss
All of the things that was mentioned above does not guarantee that you will earn in trading but those are some tips that might help you become successful. Your success still depends on how eager you are. Your eagerness to be successful must be associated with discipline and patience.