Trading is the smartest profession in the world. If you are smart enough to understand the market movements, you can easily secure financial freedom. But trust me it is not as easy as it looks in the advertisement that pops up when you are surfing the internet. If it was so easy then everyone will be a trader but trust me only 4% of all traders can earn from this market and the other 96% lose their money and quit trading. According to the report of April 2019 almost $6.6 trillion transactions happens in the trading market and only this 4% of all trader is earning from this.
You will lose money in the market and this is quite natural even traders from big well-known companies also blow up accounts instead of having so much knowledge about the market. If trading is all about having a high level of IQ then the trader who has the highest level of IQ will be the richest. On the contrary, if it depends on the charting skill then the trader with the most complicated charts will be the richest person in the world. There are many reasons why traders lose their money no matter how conscious they are when they make any trading decisions. In this article, we are going to talk about a few reasons behind losing money by traders.
- Traders must need to have a well-established trading plan and have to be confident about it. They just need to have well-defined entries, lot size according to their trading balance, risk-reward ratio, reasons behind their entry and exit for any trade-in this trading strategy. Trading without any plan is like a boat in the middle of a river that doesn’t have any place to go. So trading without any plan may give you the random result and you may get profit but trust me that profit will eventually go to its rightful owner who is trading with a proper trading plan.
- Traders must need to control the emotions no matter how bad or good his trades are going. Often traders do not do their homework on the historical price actions and as a result, they make a certain decision which makes them suffer a lot. There will be a time when you may lose trade continuously or you may get overwhelmed by profits and you need to be clam in both types of situations and should plan your next move very sincerely. But if you get overwhelmed by this type of situation then you just going to blow your account sooner or later.
- A popular mistake often traders make is they found some sure signals and think about going big and as a result, they open position with an insane amount of lot size which does not match with his account balance. They might warn like this from one or two trades but the will blow their account sooner or later if they do not stop taking decisions like this. Think about the top traders in Australia. If you visit Saxo markets, you can slowly learn how the elite traders are taking the trades.
- If a trader is more obsessed with thinking himself right in every aspect of life rather than making money then this illogical thing will lead him to blow his trading balance very soon.
- As a trader, you just need to gain every drop of profit you can gain from any trade. But sometimes fear of losing some profit starts to build in mind and as result traders often exit from trades early and lose the opportunity to earn more from trade. It is not thoughtful to exit a trade without having a proper reason.
- Traders often don’t use any stop loss and think that they are sitting in front of his trading platform and they can close the trade manually. But trust me market can go far away with a blink of an eye before you may click the stop button. In this period, you may lose all your trading balance.
So these were the key reason for how traders lose their money and we hope our article may help you to find out if you are doing mistakes like this and may avoid doing so.