Just like any other profession trading and investing is not as simple as some youngsters on YouTube who regularly flaunt their lambos want you to believe , its much much competitive because in discretionary trading or investing you have to not only outperform the other stock traders and investors but also the algos deployed by the institutions , you have to fight a two front war in order to succeed in trading and investing in the stock market , below we explain the top 5 reasons for failure in this industry –
1. They don’t have time for learning and gaining knowledge –
The most important thing before delving into the financial markets is to always have the knowledge of the inner workings of the stock market , one must learn and learn at least till the lingos used by the experts on televisions don’t bother you anymore , without learning or failing to gain the proper knowledge you will yourself dig a hole for your doom , so proper knowledge is most important and those who fail to gain knowledge end up in losses and then blame the market for their own bad decisions , our website is an amazing tool for learning about stock market also you can read ebooks related to your interest in investing or trading , click here for amazing trading ebooks , if you want to get audio books then go to our YouTube channel we have hosted audio book there.
2.They trade and invest based on news/rumor and Tips –
Another reason for failing to meet your profit goals in the stock market is that you trade based on the news / rumors floating on trading forums , such news mostly have no real source and most of the time will hurt your portfolio and trading capital , trading based on some rumor should be avoided also trading on the tips is another mistake that beginners do , those providing tips have their own motive and they are not there to help you , one can get into serious losses or get stuck in the pump and dump schemes ( Dont know what this is ? read here ) by trading on the tips provided in the telegram channels or on online forums , we already have detailed articles why you shouldn’t trade based on news here and why you shouldn’t trade based on tips here , so we wont be talking in detail about this.
3. They chase stocks –
We have already talked about why chasing stocks is a bad idea in our older article here , chasing stocks almost always turns out to be a bad idea and beginners who don’t know how to value a stock most often get trapped into stocks that have risen or fallen exponentially and end up buying such bullish or shorting such bearish stocks , it always results in disaster because they end up buying a stock at the top and selling the stock at the bottom and as soon as they buy the stock starts falling vice versa for shorting , so stop chasing stocks wait for perfect level for entry in any stock , don’t let your Fear of missing out overtake your trading strategy , always remember the stock market will always be open the next day , if you don’t get suitable risk reward don’t chase search for another suitable stock or simply log off.
4.They take quick profits and hold on to losses –
Another reason for failing in the stock market is the sense of fear and greed in the new traders and investors , whenever such new traders or investors see their P&L in profit they jump on to book their profits however small it might be but they do like to hang on to the loosing trades , in fact its the opposite that seasoned and professional traders do , always hang on to your winners and cut you losses short , let us understand it with an example – if you setup two businesses and one started making profits while other made losses , which one will you close ? the loss making one obviously , then why its the opposite that people do in the stock market ? Don’t hang on to your losses in the hope of recovery ! One tip is to avoid looking at the P&L in order to stop emotions from overtaking your rationale , learn how you can do so here .
5. They fail to adapt as per changing dynamics of stock market-
Another reason for failure and accumulating losses instead of profits is that such people always have rigid approach towards the stock market , they don’t want to change with the changing dynamics of the stock market and hang on to strategies that have stopped working long ago , so one must always keep adapting to the changing market and adapt themselves as well as their strategies in order to maximize returns and to reap profits from the stock market in the longer term.
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