Why 90% of intraday traders lose money

As per the latest statistics, approximately 30 million people in India trade in stock, commodity or currency markets. Every trader or investor trades with the intention of making money. However, as per statistics about 90% of traders end up losing money while trading in stock markets. Unfortunately, if you are one of them, please find below the probable reasons why your portfolio isn’t yielding you any returns:

  1. Lack of financial knowledge

Even though a majority of the trader community are literate, most of them lack the necessary financial education to succeed. This is because, normally, we tend to open a demat a/c & start trading or investing hoping that the shares we buy will give us excellent returns over a year. Unfortunately, HOPE is not the best way to start trading. Ensure that you are well versed with technical analysis, fundamental analysis, futures & options strategies before you even think of trading. Learn atleast the basics like how to analyze the P & L A/c, Balance Sheet, Cash flow statement, ratio analysis, important technical patterns like the doji, hammer etc. if you intend to succeed while trading.

  1. Dependence on others

Majority of the traders I know always tell me that either they trade on the basis of their brokers’ recommendations, parents, friends’ or relatives advice or refer to financial news channels to take their investment decisions. Please remember that you are investing your hard earned money and only you should be responsible for your trading decisions. Stop depending on others to make money for yourself or else you will continually be let down by others’ decisions & lose money heavily over a period of time.

  1. Lack of patience

Everyone wants to make a quick buck! We live in the Technology Age where any information is available within minutes, food is delivered within 30 minutes, mobile phones are purchased & delivered within hours. However, if you want to make big money in the markets, remember it is more of a game of patience than anything else. Many traders make haste & exit good stocks, later to repent on their bad decisions. Remember, Rome was never built in a day! Apply the same principle while investing & you will start seeing better results.

  1. Half baked knowledge

If my 1st point stressed on lack of financial knowledge, that section is slightly better off as compared to people with half baked knowledge! Over a period of time, I have witnessed people claiming to be theoretical experts losing heavily while trading. This is because in life, practical knowledge will always hold you in a far better position than theory. Get yourself practical training rather than reading through 10 books on investing. Trust me, it will make a world of difference to you over a period of time.

  1. Time is the greatest enemy for intraday traders

Yes! One must always follow the trend but firstly it is important to identify the trend in the right manner. Many traders directly jump to the 1 minute, 5 minute or 15 minute chart without even analyzing what has happened in that particular stock over the last few months, years! Please remember if you do not understand the long term trend of the market, you will never be able to make money in the short term as well! Make it a habit to see Monthly, Weekly & Daily charts before observing the intraday trends. Trading this way will be a lot easier & profitable for you!

  1. Lack of understanding of global markets

There is a famous saying ‘History always repeats itself’. This is because governments world over along with people keep committing the same mistakes over & over again. It is not rocket science to have a basic understanding of why the European & Chinese economy are weak. Develop the habit of reading financial newspapers, websites to understand the global economic scenario. Traders who cannot identify global trends will find it difficult to trade successfully in the future.

Overall, I believe it is not difficult to make money in financial markets. However, it does require discipline, patience & good financial knowledge to make & sustain great returns over a long term horizon. Making mistakes is good but repeating them isn’t! Try developing these qualities and I’m sure you will join & increase the 10% profitable club in the near future.

9th May 2016

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