How to Avoid Losing Money in the Stock Market?

in trading •  3 years ago 

a.Don't Use High Leverage. ...
b.Don't Invest All Your Money in One Asset. ...
c.Don't Time the Market. ...
d.Don't Chase Money to Make Money. ...
e.Don't Close Losses in Short Term. ...
f.Don't Rely on Analysts too Much. ...
g.Don't Ignore Catalysts. ...
h.Don't Sell on Panic.

Importent :Ad

TRADING DAY TRADING
4 Ways Your Mind Is Tricking You Into Being a Losing Trader
Carry Trade
•••
BY CORY MITCHELL Updated October 29, 2021
REVIEWED BY MICHAEL J BOYLE
Don't think your psychology plays a role in your trading? Think again.

Every day, we do thousands of things we don't consciously control. This is a good thing most of the time, as we'd never get anything done if we had to actually think about taking each breath, walking, or moving our facial muscles to smile.

However, the same auto-pilot programs that help us navigate the outside world can actually harm us when it comes to trading. We can't turn these programs off, but we can become more aware of our mindset and take steps to re-program any harmful habits.

Availability Bias
Availability bias refers to making decisions based on the most immediate information. In other words, you make judgments based on the first things that come to mind when you're presented with an issue.1

What you most readily recollect isn't necessarily true, but your mind tends to think it is. Research and thorough digging can usually catch any inaccuracies, and that's another reason why traders are advised to personally check facts and figures before using such information to trade.

What harms even more traders, though, are their own experiences. Say you read about a strategy online. Everything looks good, and so you start to use it. You lose five trades in a row. Your own experience now tells you this strategy is garbage. But is it? It could be, but you don't actually know. Your mind has just tricked you into assuming it is because of your own recent, negative experiences.

The problem with personal experience is that it is the most readily available data source, but it typically relies on small amounts of data. Beware of small sample sizes; you don't know whether something works until you test it thoroughly.

For a trading strategy, that means trading it for a couple of months in a paper account. By trading it regularly in a variety of market conditions without the emotional impact of losses or gains, you'll have a better set of data with which you can truly evaluate the strategy

Loss Aversion
Our mind views a​ ​loss as more significant than an equivalent gain. We don't like to lose what we already have. Therefore, when we have a losing trade, we may try to avoid actually realizing that loss. By refusing to cut our losses, we open ourselves up to even bigger losses.

We rationalize it by saying the trade will come back in our favor, so we give our stop loss more room. However, if your initial assessment of the trade was correct, then a move below your stop level means you were wrong about the trade, and you could ultimately lose much more money by staying in the trade.

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order:  

Hello welcome to Steemit world!
I'm @steem.history, who is steem witness.
This is a recommended post for you.Newcomers Guide and The Complete Steemit Etiquette Guide (Revision 2.0) and, recommended community Newcomers Community
I wish you luck to your steemit activities.


(The bots avatar has been created using https://robohash.org/)
@steem.history

My witness activity

My featured posts

image.png
please click it!

image.png
(Go to https://steemit.com/~witnesses and type fbslo at the bottom of the page)