Did you know that the money lost by 95% of traders goes to only 5% of big traders in the stock market? And you are one of them right, that’s why you are here. Don’t worry losses and profits are two sides of trade and lakhs of people lost daily so you don’t have to regret or feel guilty about the losses instead try to learn from losses and never made the same mistake and focus on minimizing the losses and try to recover it you are just lacking some things that put you on the losses side of the trade.
Why do 95% of people lose money in the stock market?
There are many reasons behind 95% losing their hard-earned money in the stock market most common are lack of knowledge and greed as people think that the stock market is the money-making factory, it is but not for the new small traders. It is a money-making factory for those who knew how to make a profit and did not trade with emotion. Greed makes people make mistakes and took the wrong trade which ended up in losses.
No, if you keep doing the same mistakes that you have done in your past trades and yes if you are ready to learn from your mistakes and forget about your guilt of losing money.
Learn from your losses
There is a saying that Losses are not losses if you learn from them. If you are new in the stock market and just opened your trading account then stop trading right now and find a mentor to learn about trading until then try investing in mutual funds or took low-risk trades it will keep your capital protected. Learning in the stock market is as important as in any other profession. And if you already made big losses then find a mentor who can help you in recovering your losses in the process of learning.
Leave the guilt
You can not recover money if you trade with the guilt of your previous losses it affects your decision and you did not trade with confidence even if the trade is on your side, you either end up in small profits or losses.
You have to try meditation it will also help you in many others ways. A trader needs to keep his mind cool and quiet. You have to become emotionless in the market.
You will start making money if you overcome hope, fear and greed. As it is the basic nature of a human being to feel hope, fear and greed it is hard to overcome these emotions but with time you can control these emotions.
Take a break from trading
If you made big losses in the stock market and in the hope of recovering it in one shot ends up in more losses then you have to keep in mind that you cannot recover your money in one trade or one day. The money that was gone is gone so stop trying to recover it in one trade and took a break from trading for a while. And in the meantime try to work on new strategies. Spend some time with your family and friends it will help you to overcome guilt.
Analysis of your loss-making trades and find mistakes you had done and wrote them down in your trading journal. Taking a break from trading does not mean taking a break from learning.
Redefine your risk management
If you make losses constantly in the stock market that means your risk management is not defined or you did not follow your risk management and trade with emotions, as you already know that there is no place for emotions in the stock market.
If you are new in the stock market and does not have an idea about what is risk management? So what risk management is.
What is risk management In Stock Market?
Risk Management is the capacity of losses that can be bear in a particular trade. Predefine risk management can help in minimizing the losses.
If you already follow risk management and still having big losses then you have to redefine your risk management in such a way that can minimise your losses.
Make a strategy to recover losses
You have to make a strategy about how you will recover your losses. Don’t try to recover all of your losses in one trade or one day. Right it down in your trading journal, execute in the stock market and if you had a predefined strategy it can help you to make profit goals which will help you in removing your lost money in the stock market. Made small goals and keep your risk capacity low as it minimizes your losses and helps you to not make more big losses. Made goals according to the rate of return not according to the amount. Make small goals and try to achieve them it will help you to gain confidence again in trading, keep your position size low and risk-reward ratio to 1:1 or keep trailing stop loss after it achieved 1:1 as booking profit early is like booking losses.
If you are new in the stock market and didn’t know what is risk-reward ratio is? Don’t worry we will tell you in simple words?
What is a risk to reward ratio?
The risk to reward ratio is the ratio between the amount of money that you risk for expected profit in that trade.
What is 1:1 risk-reward ratio?
It is the most favourable risk-reward ratio if you are a beginner. suppose if you have a risk capacity of 100 for the expected 100 profit then it is called the 1:1 risk to reward ratio.
Losses are part of the trade
Remember one thing not even Warren Buffett can make a profit a hundred out of a hundred times. You can not make profits without losses. our goal has to minimize the losses by putting stop loss and by maximizing the profits by trailing stop losses. And if you are new in the stock market and does not know what is stop loss? Don’t worry we will tell you in simple words.
What is stop loss in Share Market?
Stop loss is the price on which your risk capacity ends.