FinTech

11 Reasons Why People Fail at Online Trading

Why People Fail at Online Trading

People fail at online trading more often than they succeed, in most cases at least. Trading is a different ballgame from investing. People invest their savings all the time for whatever reason.

Trading, however, is a different horse altogether. Online trading is the sale and purchase of financial products through an online trading platform. In addition, people lose money on it every day because they aren’t doing it right.

Why People Fail at Online Trading

There are no fixed rules when it comes to online trading. Just a set of best practices that traders have evolved over the years. Trading has come a long way from getting on the phone to buy that stock and sell this stock. Online trading has changed the game substantially.

Most people don’t realize this, and fail at online trading because of any of many reasons: Here are more details on how people keep making these mistakes.

1) Looking for Instant Gratification

Many aspiring traders are always on the lookout for The Holy Grail. This is their downfall. They keep jumping from method to method, system to system, looking for the magic solution.

There is often no systematic process behind their thoughts. They just move from one method, indicator or service to the next. If you are a trader who does this, you need to stop immediately or you will face sore disappointment.

2) Going in Without a Plan

A method behind your trading activities is essential if you want to succeed at online trading. In the real world, markets are fast-paced, confusing and complicated.

If you don’t have a methodology behind you, you will be overwhelmed. You need a concrete plan that you can use repeatedly for success, adjusting it as times change.

Creating a trading plan requires experience and is an individual process. Don’t think you can copy someone else’s plan and be just as successful.

3) Having the Wrong Mindset

Emotions cloud judgment. This is especially true in sensitive occupations like online trading. Being emotional in an environment that is inherently uncertain can be disastrous.

If you go in with an undisciplined, emotional mindset, you will face setbacks almost immediately. You need more discipline and less emotion in online trading.

This does not mean to disassociate yourself from your emotions. Instead, it’s how you deal with your emotions under high-pressure situations.

4) Poor Trade Sizing

Trade size or account size is key to your success as an online trader. Poor trade sizing means you’re risking too much on every trade. This is a situation that is destined to implode.

Trading is not a short-term thing. You need to play the long game. Losing trades is a fact of the game. But how you deal with losing them is what will establish you as a trader. You need to consider exactly how much you’re willing to risk per trade and when to exit.

Also Read: The Best Ways to Understand Trading and Where to Start

5) Risk-Reward Ratio too Low

Traders often end up with a poor risk-reward ratio at the end of the day. This is because of one of two reasons:

  • Reactive trading without a solid plan
  • Holding losing trades and letting winning trades go

Both reasons can be catastrophic to your trading dreams in the long run. You may see some success in the short term, but without a plan and a good risk-reward ratio, you won’t get far.

6) Holding on to Losses

People don’t like to lose. Many traders make the mistake of holding on to their losing trades. They keep hoping that the loss will rebound and recoup the losses incurred. Instead of doing this, try to focus on how you will deal with these losses.

On the other hand, we have traders who let go of their winning trades too early. This is because they’re afraid they may have to give back profits if the market goes down. Think profitably. Let go of your losses and hold on to your winnings.

7) Black-and-White Perception

Many people are under the impression that online trading is a black and white thing. Yes, sometimes A + B does equal to C. But it’s more likely that A + B may equal 1, or F or Z.

There are a lot of grey areas in online trading. If trading was simple, everyone would be successful at it, not just a few people and firms.

8) Overtrading

What is overtrading? I would say, trading just for the sake of trading qualifies as overtrading. The only reason for you to trade should be because you see genuine opportunities.

It’s not like a day job where you’re rewarded for constant productivity. A trader isn’t paid to push buttons, a trader is paid to make winning trades. Be patient and wait for genuine opportunities to trade. Otherwise, you’re just shooting in the dark.

9) Looking for Shortcuts

Many people fail to understand trading is a vocation and has a learning curve. Simply reading a few, condensed guides is not going to make you a successful trader.

Scams and shortcuts don’t work when it comes to online trading. You need to put in the effort to learn the ropes. You may even need someone to help you. Which brings us to our final point.

Also Read: Smart Supply Chain IoT: Five Benefits

10) Not Working with a Mentor

Every successful trader has at some point worked with a successful mentor. This person helped them to make plans, strategies and learn how to be successful.

A good mentor can be invaluable. A mentor can make the difference between a good trader and a bad one. So, choose yours wisely.

11) Not Using Trading Tools

Traders must know all the essential trading tools to analyze the market and make better trade decisions.

So, before starting online trading, find the best tools that you think you might use. There are many options out there.

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