In India, around 90% of the traders lose their money. Those who are new in stock market trading have no idea how markets operate and what kind of strategies stock market traders should follow to make profits because new traders have not taken the time to understand the markets and trading concepts.
You should know what Intraday Trading is. It is a type of trading in which a trader buys and sells stocks on the same day. The trader never takes delivery of them. The trader makes money when he buys low and sells high.
To trade successfully, you should know technical analysis, fundamental analysis, economic indicators, and other important aspects that affect stock prices.
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Why Traders Lose Money in Intraday Trading?
Not Setting Stop-Loss:
Setting Stop-Loss is the most important thing that a trader must do. The stop loss can save you from losing all your money in one go.
If you don't want to lose your hard-earned money, then set a stop loss on every trade so that if the trade goes against your prediction, it will get closed automatically, and you will not have to worry about it anymore.
Not Conducting Technical Analysis:
Technical analysis is very important for Intraday trading because, without technical analysis, you cannot predict the future movement of any market or stock and hence, will not be able to make profits from it.
Technical analysis is analyzing charts and indicators like MACD, RSI, etc., which helps predict future trends of any stock or market and, hence, helps make better decisions about whether or not you should buy/sell a particular stock or market.
Going against the Trends:
Trends are very important for intraday traders because they provide support and resistance levels that help us determine entry points into trades or exit points from trades if our position goes against us.
Thus, going against the trend can lead to huge losses if you don't have enough patience and capital to hold onto your position while waiting for it to reverse to book profits when it does.
Also Read - Open-High and Open-Low Strategy in Intraday Trading.
Following the Herd:
Traders who follow the herd are typically those who have been unsuccessful in their trading careers.
They tend to follow the path of least resistance, which is typically a losing one. Traders can do this in multiple ways, such as following your favorite expert or news source or even going with your gut feeling.
Being Impatient:
Impatient traders will often rush into trades without doing enough homework or research on the market. They feel that they will miss out on the big moves and profits if they don't get in now.
However, this is not always true, as there are many times when markets move slowly, and you would have been better off waiting longer before jumping in.
Also Read - Best Tips to Select Stocks for Intraday Trading
Not doing Homework or Research:
Not doing sufficient research before entering a trade can lead to disaster if you have no idea what you are trading or why it is moving up or down at that time.
This type of behavior leads to mistakes when placing orders and stops being placed because they don't know what they are doing.
Averaging on Losing Position:
Averaging is a technique that allows traders to reduce their risk. By averaging on losing positions, you'll be able to cut losses without waiting for them to turn into profits. This technique works best with highly volatile stocks and during low-volume sessions.
The idea behind this technique is that the stock will eventually rebound from its current trading range, and you'll make money regardless of whether or not it falls further than expected.
However, many traders do not use this technique properly and lose money. They buy more when the price goes down and sell less when it goes up.
Also Read - Learn the Fundamentals of Intraday Trading
Tips to Avoid Losses in Intraday Trading
If you ever lose money in intraday trading, it's important to grasp better what happened and learn from it. This way, you'll be able to avoid making the same mistakes in the future.
Keep the Stop Loss Discipline as part of your Strategy.
Keep the stop loss discipline as part of your strategy. Stop losses are a key part of any trade; every trader should use them.
Use the right amount of leverage. If you are trading a financial instrument, you should use an amount of leverage suitable for your risk tolerance and experience level.
If you are using too much leverage, you can lose more than your initial investment by using excessive leverage.
Use appropriate position sizes based on your capital allocation strategy. You can determine the size of each position by the capital available for trading and not by emotion or greed.
Nobody made money by Over-Trading
When you trade too much, you inevitably lose money because the markets are inherently unpredictable, and nobody can get consistent time when they go up or down. However, this doesn't stop people from trying.
If you've ever tried to do this, you know it's a fool's game. Instead of accepting that it's impossible, many people need to keep proving that they can do it. They start trading more and more, which inevitably leads to losses.
Timely Exit from Losing Positions
Timely exit is one of the most important steps that traders should follow during intraday trading. It would help if you always exited from losing positions at the earliest before they become big losses for you.
Once a stock has moved against your position by 2% or more, it is time for you to get out of it and book losses on that trade before they grow even bigger than they already are.
Final Note
Traders lose money in intraday trading because they don't know what to do with their profits. They get greedy and hold on to their profits, eventually getting eaten up by losses.
