Let’s be honest. Getting stable returns as a trader is not easy. A lot of people who have entered the financial markets will leave empty-handed or even worse — lose their money. There is a number of reasons for that: some people don’t take trading seriously, others view it more as entertainment rather than hard work, the rest simply lack the desire to learn and acquire new skills. Why do you keep losing money and, most importantly, how to manage your losses? Hopefully, after reading this article you will have an answer to each of these questions.

Being ‘too smart’

Being too smart is hardly the reason why you keep losing money. After all, it is the intelligent traders who are more successful in the financial markets. Believing you are too smart, on the contrary, could get ugly. What do most “smart traders” do? They believe they can beat the market, which in fact happens quite rarely and usually should be attributed to luck, not skill. In reality, most of them enter the deal at the least appropriate time and end up in a position that is destined to lose

Very few people out there can boast the ability to outsmart the entire market. Stay humble, trade with the trend, and do not go against it — this is what a lot of successful traders believe in. Instead of beating the market try to embrace it and understand it.

Being emotional

Trading is not like life. In the financial markets, positive emotions don’t bring you happiness. Both positive and negative emotions should be avoided, as they are quite likely to hinder your trading progress. Try to remain calm and cool-headed. It helps a lot. Greed, the vice that has deprived many traders of their well-deserved earnings, is no different from excessive joy or tilt. Being able to stop when your trading systems tell you to is another skill you will have to learn in order to improve your trading results.

No risk management

You can bet all your money on a single trade and you may even win. But after a deal or two, you will eventually lose, and lose big. Unlike those who practice proper risk management and, therefore, lose a share of their trading capital, you can lose the entirety of it.

No funds = no trading. Conservative investors believe you are not supposed to allocate more than 2% of your trading capital to a single trade. Go for 5% if you feel lucky. But under no circumstances allocate 100% of your funds to “the deals that will win for sure”.

There is no single winning strategy and there is no robot that can yield tangible results in the long run. All the people offering you a one-time discount ‘SuperTrader 3000’ are scammers. After all, who in his right mind would sell a robot that can always win? Isn’t it a good idea just to keep the goose that lays the golden eggs in secret and speculate on it? Better dedicate the time that you could have spent to look for a working robot online to education and trading on a practice account.

Adding to a losing position

You can’t even imagine how many traders keep adding to a losing position. It is indeed unsettling to see your position melting down as you nervously stare at the screen. Yet, there is a better decision than throwing in more money. Consider cutting your expenses instead. When you see the trend turning against you, an immediate exit is oftentimes the best decision. If you still find it emotionally difficult to do, reread the “Being emotional” part once again.

The original article by Vasiliy Chernukha was originally published at IQoption Blog


Featured Image Credits: Pixabay

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