Despite the damning statistics and the inherent uncertainty in the outcomes of trading, traders continue to take the risk and invest their money with the hopes of getting a return. Experienced traders and share tips have highlighted several ways in which traders lose money. From this information, we have selected top ways traders fail that can assist you to avoid making the same mistakes.
Trading to learn
Most of the traders who have sustained losses from their trading experience acknowledge that they started trading without receiving any formal training from a professional. Armed with only the basic information about markets, some people invest and start trading hoping, ignorantly, that luck will be on their side. Instead of learning how to trade, these investors begin trading to learn how the markets work
Understanding the risk level of a trade and the risk category that investments are placed is the first step to avoiding losing money when trading. Conducting a risk assessment of the investment opportunities in the market enables a trader to determine the leverage that they hold against the investment and whether it is worth placing a wager using the leverage.
Lack of money management skills, traders hold on their stakes for either too long or release them too fast. Therefore, despite making a profit from a transaction, the trader ends up losing money.
At last, traders loses money because they lack a trading strategy or if they have one, they deviate from the plan. For example, a trader without a diversified portfolio is likely to lose money because of lack of risk spreading and lack of intraday tips for day trade. Consequently, trading without a limit order or a take-profit order exposes the trader’s positions to further risk of losing money with the hopes of a ‘miracle’ at any time.