Data says 95% traders are losing and only 5% of them are making money. To elaborate it, it’s not that 95% have just lost their fund always and have not seen any profit. They have been into profits and losses both however after a period of the time when they have seen the end result, they could not increase their fund and more than 60% of these 95% have lost badly. There are few who though made money however they paid most of the earned money to their brokers.
In Niftymillionaire, we talk almost 100 people every day and these are few points which I could observe about the trader’s psychology and behaviour:
- They trade seeing others making money from the market: Most of the traders start trading when they require extra money and they have seen someone making money or someone giving them information about money being made by many from the market. However mostly forget to focus on making money and start doing trading thinking that if they do more trade they will make more money. This is something very similar to this point where a student who studies for more hours or reads more books, thinks that he should top the exam.Others are making money with an activity does not define this outcome at all that you will also make money through that system. Do same food, same kind of clothing, same weather conditions, etc suit to two brothers whose parenting has been done in the same house by same parents? It’s a rare scenario. You are trying to generalise a rare scenario, which is a flawed concept.
- They want to make quick money: Trading activity is so tempting due to the live data available on your screen where we can easily see the transaction of huge amount taking place every second that we associate the process of money making with the same speed. We see similar scenarios only at Gamblers den or at a Casino and hence related the feeling of making money in stock market with these places. That leads to develop an urge to make quick money.Trading is a business not gambling. Any business has done anywhere in the world have some set rules to start generating money. None of the business makes money overnight. Business always needs to be taken as a baby and the baby should be nurtured first. You can’t ask your baby to start earning until you nurture and grow it in the best possible way.
- They believe others/analyst/advisers blindly: Most of the loss making traders has this tendency to believe either advisers/analyst or some of their known person blindly when it comes to decide what to do in the market. Sometimes they have some knowledge and use their brain also however once they hear something similar to their own decision made earlier, they take it as the right strategy and follow it. Then there is second group which just listen advisers and analyst and follow them blindly.It’s not wrong to believe others however belief should be made on them who are already successful in achieving the same what you are aspiring for. You don’t do any due diligence about the actual achievement of the person whom you are going to follow. Most of the analyst or advisers who come on screen they clearly mention during declaration at the end of the show that they don’t have any personal investment in what they suggested for still I have seen people following them.
- They are risk Averse: Every trader wants to make huge money, wants to be a successful trader and always thinks about profit from the market. They are also aware that big rewards come from the big risk. However when it comes for them to come out of their comfort zone when putting money in market, they become uncomfortable. Nobody wants to make losses in spite of knowing the fact that Losses are the biggest truth of this business. They keep dreaming about profits however never count their risk.Becoming uncomfortable coming out of comfort zone is the biggest risk of one’s life. You have to believe the real life scenario. None has ever got anything bigger in one’s life without taking risk. Along with safety investments, you have to work in stock market as well simultaneously. This is the only segment which has the proven record of beating inflation in the long run. If you don’t beat inflation, you are getting poorer day by day.
- They have instant gratification: Instant gratification means when you want it, you want it right now. Mostly traders don’t have a habit of deferring their urge to book profit soon and also taking their profit out of the market for their use. They don’t take a long term position mostly because they don’t want to wait for future in fact just want to fulfil their instant happiness.Patience is the main key of achieving success in any field. Many such scenarios come into the market where the market takes such a movement which you have not even thought about and keeping patience at that time is the only way to be a winner. Very few people are ready to wait for bigger returns as they know that thinking for instant result will divert them for making a big place in the industry. A student, who has patience, sits tight, prepares for the competitive exams has the maximum probability of qualifying the entrance and same is the story of a trader.
There are numerous reasons which we can discuss here which are stopping these 95% traders to make money from the market.
The solution is simple – make a goal, plan how to go for your goal, execute your plan, don’t change you methodology with the changing market, review it on a regular basis and then keep working on it with patience until you feel satisfied.
It’s about valuing your hard earned money which will stop you from making mistakes which traders who are losing make in the market.
Author: Abishek Raaman