Intraday Trading also known as (day trading) a popular practice among the stock market sigma that purchases shares and sells the same day to get a benefit of small an increment in a price. The promise of easy money is difficult to resist, but for most participants, the reality is quite different. The majority of intraday traders, about 80-90%, fails to make any money. Why and how it occurs and how to deal with it in detail.
There are few points discuss below “Why Most Intraday Traders Lose Money”
Lack of Education and Preparation
Lack of knowledge and preparation are among the primary reasons intraday traders lose money. Unlike long-term investing, intraday trading involves understanding of market mechanics, as well as some basic knowledge of technical analysis and trading strategies. Most traders get in unprepared, based on some tips, a gut feeling or some quality that they hope will lend them an edge, misact and misoperate in serving justice and making taking losses.
Emotional Trading
The stock market is a psychological war zone. Intraday traders are frequently overtaken by their feelings — fear, greed, and overconfidence can cloud judgment and cause rushed decisions. For example, reinforce the fear of losing the opportunity to enter a position with a traders, or cause panic to sell at a dip in the market. Everybody would need to keep up an enthusiastic control however oh dear it is a great deal harder than it sounds
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High Transaction Costs
Intraday trading has the shortcoming that leads the user to high transaction charges like brokerage, taxes because the trade is more in number, buying and selling of shares is frequently happening. These costs would quickly accumulate, cutting away at any potential margin or landing inside a loss column. These costs can be quite significant for many traders, and the foregoing costs are often underestimated by sellers, particularly when small price movements present this.
Market Volatility
Intra-day trading needs the high market volatility bunt due to extreme market volatility may be harmful. Sharp price fluctuations in very short spaces of time, combined with market turmoil create massive risk for exploitation for the unprepared. Predicting and responding to spontaneous market changes are skills that take time and experience.
Leverage and Margin
Leverage – This is another feature where many of the intraday traders go too high to make more profits. More trading capital means the ability to profit and suffer losses, which can be offset by leverage. Margin trading — borrowing to make trades that can lead to debt if things go wrong. Most traders chase leverage, they seem to forget the risks involved and the financial pain it can cause.
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Overtrading
Overtrading: This is one of the most frequent traps for intraday traders. The adrenaline of trading and the thrill of making a quick buck combine to cause overtrading all-too usually on second-grade setups. If you trade excessively dumb decisions, empty hands and drains trading increases transaction costs that reduce trading performance and increases the risk of making a terrible mistake, properly matching the particular situation due to lack of mental stability or lack of mental stability.
Risk Management
Managing your risk is a crucial part of trading successfully. However, this is an aspect that many intraday traders overlook, as they trade without the use of stop-loss orders or they overcompensate by significantly increasing the size of their trades. A risk management plan has to be established otherwise a few bad trades can destroy a lot of trading capital.
Chasing Trends
The trends in the arena of intraday trading change frequently as it is characterized by dynamism. The traders who chase the next trends without a foundation on the market forces are the same who suck up buying high and selling low. Powers traders use an exhaustive and top down analysis approach and wait patiently to follow their strategy than chasing the market powers.
Lack of a Trading Plan
Well, a trading plan is part of your way to success together with it. Too many traders have no plan and base their trading on random, spur of the moment decisions. A trading plan details the entry and exit strategies, risk management regulations, and profit objectives It simply means traders are more likely to make decisions that are not based on a rule set but rather driven by emotions-with a higher frequency.
Conclusion
In the world of day trading, you can honestly make a lot of money but there are so many obstacles, my God! The main causes that make 99% intraday traders to operate in loss are lack of knowledge, Operate on Emotion, High Transaction Cost, Market Volatility and lack of risk management concept. Intraday trading success needs discipline, learning, and a strategy. Learning about and reducing these patterns practitioners can increase the likelihood of survival and perhaps even begin to make trading a profitable business. hope the topic “Why Most Intraday Traders Lose Money” help you to under stand how to trade and learn.
What are the common emotional pitfalls in intraday trading?
Here are some typical emotional pitfalls:
The following is a classic example of an emotional trap:
FOMO stands for fear of missing out and it describes a tendency where an individual will only jump into trades impulsively to avoid missing out on profits.
Panic selling: Selling or liquidating investments by investors due to fear of loss as markets go down.
The false belief that a fund manager is so good that s/he will earn the same amount (or more) in the future for the fund as in the past, leading to excessive risk-taking.
Revenge trading – trying to make up loses by going for fast, higher-risk trades
What are some common mistakes to avoid in intraday trading?
Some mistakes to avoid
No Trading Plan – Get into trades without a clear plan and set rules.
Lack of money management: Not trailing stops or over exposing too much of their capital to a single trade.
Click Here – Overtrading – Overtrading goes hand in hand with poor probabilities; you are making too many trades with low quality probability setups.
Trading based on feelings of fear, greed, or overconfidence.
Trend-chasing: Making quick actions based on the market movement instead of in-depth scrutiny.