Almost 80 percent of the traders lose money and only 20 percent of the traders make money. Why there is a big difference in percentage for both types of traders. I wonder people lose money who came into the market to build a fortune. What is the main reason by which such traders even having skills are not able to make money from the stock market?
Before choosing the stock market as a career option, I used to keep my money in fixed deposits. I was happy with a 7 percent return (interest income on capital invested). Then I thought of entering the stock market and gaining more interest than the bank FD. I thought I would be happy if I can achieve anything between 10-15 percent per annum. I didn’t think of the other side, if I lose that money in the market, I will lose capital and 7 percent return of the capital invested in FD because my only approach was to invest money for the long term. But when I enter, I was attracted by trading as I was thinking, I can have more than 5 percent return in one day itself. This is the place where I went wrong. The same is the situation happening with each one of us during the start of a trading career.
Neither the trading nor the investment in the stock market is a wrong thing, and if you do things properly, you will make more money than the bank FD. But we try to multifold our money in intraday, we burn our fingers and money. There are 50 percent chances that you make money in a bet and 50 percent chances that you will lose money in that bet. When we decide on a ratio of 1:10,1:20 etc., our probability of losing trades becomes higher than the winning and we may end up in loss. If we think logically and try to master only 1:1 or 1:2 (2 percent profit in a trade) in all the trades and work on our accuracy, we can make a good amount and become a profitable trader.
Compare the scenario when you are investing your money in FD and when you are investing in the stock market. When you invest in FD, you were happy with a 7 percent return per annum. But when you are making 2 percent in just one day or 10 percent return in one month, you are not happy and satisfied with the return. All this is happening because of greediness. You entered the market not to gain a little extra return than the Bank FD, but you entered the market to multifold your money in just a few months.
Trading and investing in the stock market require a lot of patience and discipline. You will make money if you keep yourself calm and not be greedy when profits come. Even with a basic and simple trading setup, you can be a profitable trader or investor. It is not the trading setup that kills traders, but greediness kills a lot of traders.