Absence of Trade Plan- Entry and Exit without proper Study
When you go for travelling, you plan in advance where you want to go based on certain condition of weather, place, costing, timing etc. you finalise the place, then you research for booking tickets, hotels, sightseeing etc. You keep in mind your time, leave and budget constraints. If you plan well, you can enjoy the travel. Same is with Trading, you need to plan and study your trade well in advance, where and how you need to take entry, which time frame you need to follow based on constraints, how much money you want to put and how much you are ready to lose, what is the target price and in which condition you will exit. Without plan is like boarding a bus which has no signboard and timetable.
Lack Of knowledge
In today’s internet world, the trading platform are easy to access on click of button, but people never think why they are buying or selling. It’s just sometime on somebody’s tip or news, without thinking about the underlying stock trend, its Price action, Structure Support and resistance. Wrong practice may lead to huge loses. People do average their holding in case of fall and keep burning their fingers.
Some trader just assume that this is bottom from their gut feeling that stock has already crashed by 25%, 50% even at 100% and keep adding in portfolio.
Lack of Discipline/ Greediness
You cannot get rich through Trading in just few minutes, days, weeks or months. It takes time to understand the system and rules of Stock market. Market examines human psychology which generally includes fear, greed, over-confidence, anger, dejection, unhappiness and disappointment. In order to make more and more money, people will become greedy and take trade indiscipline way. People tend to take benefit of every move of market resulting in losing the capital fast. I have seen traders where they executed buy trade and sell after sometime. Again, after a short while initiated the short position in same entity. Market always moves in zig zag manner; trader lose money while doing buy sell frequently.
Sentiments/ Psychology Overpowering Trading
You need to accept the truth and continues to go with a spirit of learning and not giving up for proficiency. This is how, you can become a good trader! Most of the people lose money because of this their own sentiments and psychology which overpower their trading skills. In greed to earn money, they invest in stock market solely depending on tips and advice from their brokers, friends, relatives etc. and end up losing their hard-earned money. If you are doing this or planning to do this then this a strong NO!
Money Management Strategy
Market is not about to earn money, it’s about to Grow your money/capital. Hence you need to have Money Management Strategy. How much you can lose per trade; accordingly, you need to calculate your position sizing and stick to trading plan. If your trading plan says to book loses, don’t be so late in thinking for reversal and change of stop loss. People keep trailing stop losses and end up losing their capital. While trading you should not have myths pertaining to stock market. Once capital is gone. You have nothing to grow.