Day trading is not for the faint of heart. It is a complex process that results in more failures than success stories.
Studies estimate that more than 80% of people who start day trading often lose money in the process. success rate usually Slimincluding some of the most experienced traders.
Therefore, in this article, we will explore this common quote: Your loss is not the market’s fault. We will also look at some ways to make you a better trader.
Why do traders lose money?
Don’t worry about what the markets will do, worry about what they will do in response to the markets.
There are many reasons why traders lose money in the market. understand these reasons It will help you to become a more efficient day trader and then learn how to avoid losing money. Here are some of the top reasons why traders fail.
Not understanding how the market works
The number one major reason why traders lose money is this They simply do not have a good understanding about how the market works.
In most cases, traders start their journeys by watching an advertisement about trading and then creating a trading account. When this happens, they execute trades and lose money simply because they did not have a good understanding of how the whole process works.
Sometimes, over-trading can lead to solid profits. However, in most periods, there is usually a file Correlation between the number of trades and losses trader makes.
Therefore, you should avoid making the mistake of executing too many trades. Doing so will often result in huge losses.
Ignoring risk management
Another reason is that a lot merchants They tend to ignore basic risk management strategies when day trading.
There are several risk management strategies that you should always use, including placing a stop loss and Place deals of the right size. Trading without proper risk management strategies often leads to more losses in the market.
There are other reasons most day traders fail. Examples of these reasons are used Wrong trading strategyUse Excessive leverageAnd Simply bad luck. Some highly experienced traders often lose their money just because of a series of losses.
Markets are unpredictable
The most predictable thing in the financial market is The fact is that the market is usually unpredictable. While we have many techniques for analyzing the market, the truth is that these methods are not always accurate.
So, since you can’t control unpredictability, You control how you handle it. For example, you can control issues like Avoid over tradingavoiding vengeance trading, and using small leverage.
At the same time, it should always be so open to change. This means that you have to adapt to different market conditions, including volatile and highly volatile ones. In doing so, you will increase the possibility of making more money in the market.
Why you should take responsibility for your losses
It is important to you Take responsibility for your losses. By dismissing this responsibility, you will not be able to make money and tackle the main issues in your trading.
There are several reasons to take responsibility, including:
- Taking responsibility will help you improve – When you take responsibility for your losses, you will be able to improve your trading process.
- He will help you Identify errors Moreover, it will help you to identify the mistakes that you make as a trader. By identifying these mistakes, you will be in a good position to improve yourself.
- It improves your performance Taking responsibility will help you improve your performance in the market.
- helps you Validate your thoughts Moreover, taking responsibility helps you validate your trading ideas and strategies.
How to mitigate the occurrence of large losses
As we indicated above, losses in the market are inevitable. You will always make them. However, there are various ways to mitigate this challenge. Among them:
Set clear goals
Having a good aim will help you avoid making mistakes when trading. The objective is simply what you want to achieve in the market. For example, if you want to earn some extra money, you should focus on several trades per day. In this case, you will be doing fewer deals compared to people who are willing to do it full time.
Have a well-defined strategy
Having a good trading strategy will help you avoid making serious mistakes in the market. You should spend some time coming up with a strategy and then test it with a demo account. Some of the most popular strategies that you can use are algorithmic scalping, algorithmic trading, copy trading, swing trading, and others.
Have a risk management strategy
Always have a risk management strategy in place that will help you avoid big losses. For example, you should have a strategy that includes a stop loss for all of your trades. Also, you should always place your trades well. Other risk management strategies are to avoid night trades and to use a small amount of leverage.
Be disciplined and patient
Discipline and attitude are important aspects that will help you avoid incurring big losses. A good example of patience is when you avoid opening a trade if the conditions are not met. For example, when trading with VWAP, you can wait until you see the asset move above the indicator before you open a trade. As such, at certain periods, it is possible for you not to open a trade for a period of time.
In this article, we have looked at the concept of personal liability and why it is so important in the market. The bottom line is that you should take responsibility for your losses and then work to improve your future trading results.