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reasons behind lose money in share market
I often meet the people who often complain about losing money in shares.
Majority of the people do not know even the difference between trader and
investor. It is very clear and surprising that both buyer and seller at the
same think they have taken prudent decision. First we analyze that why people
lose money in share market. The some reasons behind the lose money in stock
market given below:
Little knowledge:
The biggest reason for lose money in the market that people trade without
any research and knowledge. Most of time, they rely on broker, friends or so
called tips.
Greed and fear
factor: Although as a human being, we cannot control
our emotions in 100% manner but we can control and mange it better. Many times
people make buy/sell decision in very hurried manner after rumours or TV/
newspaper headlines. After viewing headlines, ticker on TV or reading headlines
in daily newspaper people were forced to take hast move without any analysis.
They sudden jump into conclusion and often make worst decision.
Lack of discipline
in trading: The thumb rule for
trading is that you should determine your profit/ loss before any trade
execution. Know the difference between trader and investors but the funny thing
is that if the trader’s expected rate do not come then the forcibly become
investor. Always put the stoploss for any intraday trade.
Too much averaging
in one stock: People often average a
particular stock and block their amount for long term and lose the bright
opportunity to make the money in another stock. You do not know whether a
particular stock price come to above your buying average in your life time.
Trade in leverage
product without knowledge: People
often trade in high leverage product and do not understand the margin requirement
from the broker side. If they do not fulfil sudden requirement of the margin
money, broker square the position and trader suffer very heavy loss special in
derivative product or high intraday leverage product.
Too much trade:
You will lose more money as your trading frequency increase. There are
many charges like broker’s commission, govt charges for each trade.
Key point to remember to enter in stock market:
- Spend time in your own research about companies business,
management, quarterly result, sector trend rather than tips from broker, operators,
manipulators, friends or totally rely on TV anchors.
- Decide your category first whether you want to be trader or
investor. In my personal view, the chance of losing money is much lower
when you enter in the market as investor.
- If you are short term trader keep strict stoploss in each trade and never
chase any particular stock for averaging in each time of falling the stock’s
price. You cannot always win in each trade.
- If you have deeper knowledge, conviction and understanding of your
stock’s business, sector and management, you can better control the greed
and fear factor in decent manner.
- Please understand about margin requirement from your broker well
before doing trade in future, options or commodity futures.
Once again my best wish
to all of you for good financial health and physical health on the eve one year
2014. For more detail and any other query related investment, you can contact
me through my email.
Warm regards,
Arvind Trivedi
Certified
Financial Planner
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