What is trading
Trading is an art of profiting from short term price movements which exists due to temporary inefficiencies in market.Trading time frames can range from a day to few months. Traders take huge risk in expectation of higher returns and will also be active in market unlike buy and hold passive investors.
Bases on duration of a trade, it can be devided into various categories like scalping, intraday trading, swing trading or positional trading etc. We will discuss those things in another post.
Why traders lose money
- Emotional trading
- Lack of discipline
- No trading edge
- No proper risk management
- No proper position sizing based on risk
- Greed and fear
- Wrong leverage
- Lack of patience
Emotional trading
Emotional control is one of the most important skill a trader should develop for success in trading. But it is also the most difficult step in becoming a good trader. Emotions are part of human behavior. you cant completely avoid it. But once you have a trading system with an edge, proper risk management and position sizing you can overcome it. Trading in the zone by Mark Douglas is one of the best book a trader must read. It will definitely help you to overcome these problems and become a better trader. You might have experience of entering trades early or exiting before reaching support ar resistance.Lack of discipline
Discipline is one of the most important thing in trading. Once you set your stop loss and target, let the price move. You can always trail your stop loss to lock your profits once it starts moving in your direction. Never trade without stop loss. Once risk in that trade is defined with stop loss and you know how much it can affect your capital you should not fear about that part. Your aim then should be to ride profit to maximum when stock starts to move in your direction.
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