Stock trading is a lucrative form of money making endeavor. It has produced a long list of people who have become billionaires such as Warren Buffet and George Soros. This is why many people start trading stocks to join the list of successful traders. However, only a few seem to make it.
Why do many traders fail?
Some people become loyal to being a fundamentalist or technician. They don’t recognize that there are times a fundamental indicator speaks the opposite of what a technical indicator shows. Most traders don’t exactly know what the market is actually saying. In other words, lack of education is the culprit. When you become loyal to only one strategy, you become closed-minded and unaware of what’s happening on the other side of coin.
How you can succeed : Study the market deeply
Being updated with the latest market sentiments will surely help you. If your hourly chart is bullish but you are unaware that the Fed made a statement on a possible rate cut, you would probably be surprised why the price of your stocks has suddenly declined. It is best to study which indicator has a high impact on stock prices regardless of which type of strategy it belongs to whether the indicator is fundamental or technical. When there is no significant fundamental news, there is a greater probability that most traders are looking at the chart at the same time, so the probability of seeing a technical trend is high.
Control your emotion
This is the most common reason why many people fail in stock trading. If you have already studied the current market and you have already made a trading plan, just stick to your plan. A sudden price fluctuation does not also mean it is permanent. Reacting to the market without knowing its long term or medium effect will slowly break you. When you make a position, set a “stop loss” and let the market go.
Follow the crowd
There is a saying that goes, “the trend is your friend.” That is true. But when there is no trend or influential news, follow the simple strategy of buying on rumors and selling on news. In order to follow the crowd, you must know which indicator is the one that truly represents market sentiments.
Regardless of stock selection, you can make good trades when you have enough knowledge of the market. Research is the key. Lack of education is the culprit. If you don’t know what is going on in the market, you don’t know why you are failing. But if you are able to know where the market is going, you know you are winning.