Best Ways to lose Money In Stock Market

When literally everyone is giving you tips on buying and

selling, something is really wrong with the analysis

or the intentions. Understanding the capital markets

needed a lifetime for many investors and traders,

however in the era of snackable vertical entertainment.

Trading, investing and anything to do with stocks or

crypto seems so easy. So, what’s the catch? 

An irrational man believes in luck; an intelligent

man understands probability. - Charles Babbage

If you delve in deeper and understand the psyche

behind those ‘analysis’ and ‘get rich quick' videos,

you will understand that much of what they preach is

difficult to follow in absolute terms. Much of what is

propagated is ideally book knowledge with lesser

possibilities of actual application. Or, sometimes is

just a sly act of gambling. Why would you risk your

time and effort to bet against all odds and then lose

money as well? 

The next few minutes of reading this piece will help

answer many fundamental issues regarding the

plaguing issue of losing money to the stock market.

Just one word of caution: do not take any information

as investment advice. It would be great if one uses this

knowledge and remains aware and vigilant in the markets.

If you are not a trader and investor, you may still connect

to many points on this blog.

Best Ways to Lose Money in Stock Market

Buying the tip, or buying the dip: Thanks to the crypto crashes

and the corrective phases in the global indices. Many

self-proclaimed gurus have given the mandate that one

should start buying the dip. This essentially means that

you buy when there is fear in the market and you sell

when there is greed in the market. This way they (the gurus)

can quote Warren Buffet and make you feel like you have

done what most people would not dare to even think.

Thereby you have been secretly lauded by the market

Gods for this bravery and you will be henceforth rewarded

for the risk, you have taken. 

In reality, the markets are a game of probability

and you would never know if your price was a good price to

buy or not. You will never know until the markets reversed in

your direction and rallied for a good few weeks.

So, then what is the point of getting into a bet with such

low probabilities? You may still want to be a high-risk taker

and get into the trade or the investment decision as per your

telegram advisory. But, what about the protection of capital?

What would you do when markets slide farther down? Do you

get out or does your tip provider has some fresh suggestion to

buy more at lower prices? Are you still averaging, what is the

strategy? When will you ever come out of the loop of buying

lows or buying cheap? 

Always stick to the rule of margin of safety. 

Now, very rationally, you could have just exited when

there was a breakdown of important demand or supply zones.

In case of a long position get out when the price has already

broken through important support zones. In case you have

shorted the market and the market is still shooting up, just

get out when you can clearly see that the market has broken

the supply zones. Don’t be caught in the opposite trends for long.

Quit with losses, without having your ego hurt in the process.

Never try and justify with different settings of indicators or setups.

Some traders or investors still try to justify a losing position to

themselves, through the use of exponential moving averages,

MACD crossovers, or Bollinger band breaks. Before you know

price will bend the variables against your position and you will

still not get an exit signal from them. Be extra cautious and look

at your Market-to-market profit and loss, before taking any

suggestion from anyone, including this blog.

Moving Averages are not magic wands:  Just check out

all the instruments or at least the most liquid ones from your

markets. Check it with any set of moving averages, do they

follow the same amount of bending and contraction, or do

they have variance? Price acts differently as the asset class

and the liquidity variables change. You should not blindly put

faith in a system that is not rigid as your sentiment for the market.

The best option is to have a different set of parameters for the

indicators to work for you in every single scrip that you trade

or invest, it may be harrowing to the mind and the eyes, and

you may not be able to achieve it by yourself. So, don’t put

your setups to be so complicated that it is tough to follow

in the long run. Keep it simple and sweet to the point.

Understand there are no ways a golden crossover or a death

cross can help you out when the market itself is not following

the same level of volatility that it used to have in the past.

When the VIX value changes or when there is a significant

event around, you can expect the indicators to go crazy.

Trade with caution in those areas. Backtesting or historical

data can be proven useless in a matter of seconds.

Leverage trading: Of course, you would need leverage

while trading the markets intraday or even in investing.

Brokers like this give you margin trading benefits too.

Many stock market winners have used leverage to their

advantage through proper risk management and understanding

of the market forces. 

One should use leverage to the point where it doesn’t hurt

their sleep and sanity. Greed is a tough competitor for your money,

it never lets your money grow beyond a point as it has the

tendency to drag your returns down. The idea is to be

conservative with your greed at the initial stages of your

investing career. Once you cross the threshold,

your risk appetite and ways to make the most out of

setups will improve. Just try and use your common sense,

and you would never have to look beyond means to take

risks and make returns in the market. Start today with

the mindset that leverage is not easy money. In fact,

it will cost you more if you go wrong even once. 

Unknown edges:  It is common for many to find

that elusive edge in the market. However, it is a safer

strategy to find your true soul purpose in the market first.

Find out, what you have really set out your goals for.

What can you do to make the most of your current setups

and most importantly who you are? This is perhaps one of

the most difficult aspects of making money in the stock market.

You can never know what you really enjoy doing in the markets

until you actually do that and succeed. Start asking questions

and see if you get an actionable outcome. Are you a

long-term investor or a 1-minute scalper? Do you enjoy making

money in futures and options, or do you just want to stay in the

bond markets? What is that one thing that truly keeps you at

your best game? Can it be replicated over a longer period of time?

Can you teach that to anybody easily

If it can be followed and repeated, it is probably very simple and

easy to not make mistakes? One should use such common

ways of identifying one’s edge in the market, Following the

books of legends and outliers will give you perspectives and

the know-how. But, to know oneself is tough, unless you have

faltered enough and lost some money in the mix-ups.

Never mind the time, follow the setup and risk-less amounts.

Your profits and losses are yours and no tip provider or

anybody else will want to partake in that.  Be wise and you

will win eventually, don’t give in to nonsensical expectations

and fears.

Trading psychology horrors:  Trading can be easy when the

rules are not that complicated for you. And, rules get complicated

when one brings emotion to the trading setup. What if your trading

stop loss and targets are set, and you are as good as your day or

as good as your mood always?

Take control of the most difficult aspect of the trading universe.

The emotional roller coasters of losses and profits can really

shake anybody, be that a well-learned professional or a newbie.

Experience keeps you immune to such upcycles and downcycles

in the journey. One can easily take leaps of faith in their selves

and think that they have mastered the art of psychology through

books, seminars, and lectures. But, it's a practical skill and

no bookish knowledge is perhaps enough. The only way to

learn is perhaps through the mistakes you do along the way

to your path of glory. Your psychology will be made across

multiple sessions, why would one give up in the middle of

the progress? Because their psychology might not be

updated as their day progresses in the market. It is crucial

to put your head and heart in the right place and take smaller

steps to profit. Discipline is a rocky mental game and it can

really be tough to ace. Building psychology comes through

various means and it starts through the morning session until

the end of the day. One loss a day or three, one always needs

to be equipped financially and mentally to come back the

next day and bounce harder. Setups will not lie over a course

of a period, but the most horrific part is that setups can dwindle

and die too soon if greed and fear decide to devour them.

Simple errors in the market can be improved upon and

eliminated by following a trading journal. 

Books like this might help you in this process.

For Habit Creation and stacking

For Wealth Creation

For a change in perspectives

For Psychology

The easiest way to top this game of psychology is to give

up the attachment between the scrip and yourself. One can

turn off the attachment with strict discipline and practice.

Build habits that are easy to carry on and difficult to live

without. One can start to believe in the setups and the ways

the trades are undertaken, rather than following the profit and

loss statement on their tab. Once you are detached from the

company or the index that is being traded, it is all about the

numbers and your strategies. But, it's true that this is

easier said than done.

Risk-to-reward ratio nonsense: This particular concept is

so skewed and can have so many dimensions to it. Every

index and every instrument will have different volatility. Even

if you have a good risk reward setup, and you believe that

reward is supposed to be higher than your risk, it may not

hold true to the underlying instrument you are trading.

Why does it have to be so rigid when you have so many

opportunities to make or lose money in the market? An

ideal solution that many resorts to are simply following a

hard stop loss based on the percentage of their capital.

They exit a trade when their losses cross a threshold.

That can be a smart way to work around the tough terrains

of making money when you have so many odds against you.

The big downside is that you may not be holding onto your

own rules and giving to irrationality and emotions.

Then it all falls apart once again.

In Conclusion, it should be said that no matter how many

different sources of learning materials you use, it is never

enough to learn in the markets. Not every trader and investor

behaves the same. Some buy at a higher price to sell higher.

Some buy at lower prices to sell lower, and some buy a lot

and then dump it all. Let’s not get into the rug-pulling scams

here, but the point is that if anybody promises that you will

master the art of probability. They know what they take you as.

Perhaps, the best way to learn is through your past trades

and your past losses.

Read more market-related topics here

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