When an individual decides to pursue trading as a full-time career option, he tries to stick to two main objectives: to make profits and not to lose any of it. On the surface, these look good objectives. Profits and losses are the main part of trading. In actual, there are mainly four types of losses/profits. These are
- Small profit
- Big profit
- Small loss
- Big loss
Taking small losses and big profits are the aspects to be looked for, but the reverse happens. Most traders start their journey working on taking small losses and waiting for big profits. But with time, this equation is lost somewhere. The reason is, profits and losses trigger two main emotions: fear and greed. Moreover, these emotions cause traders to book profit early when they are winning and to hold on losing trades as they do not want to lose money. Due to the fear of losing money, many traders do over-trading and do not think logically. But the fear of losing money becomes so high that they trade one stock multiple times in a day, which leads to another type of loss, i.e. loss of brokerage and taxation to their current trading loss.
On the other side, if a trader works properly on risk to reward ratio and control two emotions: fear and greed, no one can stop him to make profits in the market. But the condition is, he should be patient enough to wait for the right entry and exit time in stock. In stock market, 100 percent accuracy is not required. If a trader winning rate is 50-60 percent, and he works properly on his risk to reward ratio (generally 1:2), he will be in profit at the end of a month.
At Pathfinders, we teach various strategies and proper risk management. Using these, your view of seeing the market is changed and most likely, you become a profitable trader.