Share Market Yes, you must have heard this word at some point or the other and along with it you must have also heard that the stock market is a speculative market or is like gambling, but along with all this, you have also heard this.
I must have heard that I have made very good profits from the stock market, but have heard very little about making profits and have heard a lot about making losses, I have heard it right, there is no lie in this, but do you listen to these things? At the time you had noticed something, who are the people who are saying these things?
In this topic, we will learn about the main mistakes due to which more than 90% of people suffer losses in the stock market.
Not only in the stock market but everywhere, our psychology has a great contribution, no matter what it is, but what is this psychology, in fact, due to which some people climb the ladder of progress in their life.
If we go, some people go through so many struggles night and day even to live their simple life, if we understand in easy language, then this psychology is our own born thinking, it is our own attitude, people’s attitude. To understand the problems of seeing things, but how is this thinking formed? So the simple answer is that as we train our mind, it will give back to us the same thoughts.
So when we invest in the stock market and then what we think again and again in our mind, that becomes our psychology, as if it comes in our mind that there should be no loss, just a little profit is being made. I take it, everyone is saying buy or sell it, so I do it the same way.
This means that if you allow your mind to be affected by some other external things, then the result will be the same because if more than 90% of the people are harming outside, then you will also be harmed because of your psychology too. I am influenced by them.
Have you ever heard and seen that a business or work in which there is a possibility of more than 90% loss or spread, even after that the business is increasing day by day at a new speed, then that business shares?
It is absolutely true that most of the people suffer losses in the stock market, but it is equally true that money can also be earned from the stock market, which is about 10% of the people who are making good profits continuously, after knowing this much.
A question definitely comes that what do these 10% people do, so that they earn good profits continuously and what do these 90% people do so that they only get lost in the stock market.
Of the share market trading and investment, trading setup, trading strategy, trading tools contribute only 20%, the remaining 80% is useful for your Psychology, Discipline, Emotions, Money Management, Risk Management Objective.
Important Reasons for Bearing Loss in Stock Market
So let’s know those important (mistakes) reasons, due to which more than 90% of the people in the stock market have to bear the loss only:
Investing without Learning Anything
One of the biggest, important and first mistakes made by stock market investors and traders is that people start investing money in the stock market without learning anything.
People do not understand that the job or business from which they spend their lives today. For that he has studied and worked hard for at least 12-15 years, so can’t he take out few days to learn about investing to get a good return on that money?
If he wants, he can learn little by little every day. But people do not do this and they invest without knowing anything properly, and then they lose. That’s why you must avoid this mistake and spend your time learning.
Never invest in anything that you don’t understand – Warren Buffett
It is a simple matter that for the job you are doing today, you have first 12 years of schooling, then 4 years of college studies and then works experience, which means 18-20 years of time and giving an investment of 4-5 lakhs.
After today you are able to become worthy that 40-50 thousand, are getting the salary of 1 lakh rupees, then how can you think that you can earn from here without learning anything in the stock market. Along with this, it is also that Even after giving 18-20 years time, when you started your job or business, you were not getting the same income as you are getting today, But when you invest in the stock market, you want to earn a manifold of your investment from the very first day, you think that if you have invested 1 lakh, then I should earn 1 lakh in a month and in this process your hard work. loses his earnings.
That’s why it is better to learn about investing by investing some money and time than making such a loss of lakhs of rupees. So that you can save those lakhs of rupees.
Chasing Free Key Investing and Trading Tips:
Our mindset and nature are such that we don’t want to put effort into our own, instead, we want everything for free or at a discount. Why we don’t understand one thing, whether it is free or discounted.
Things are found whose demand is less. What we do in such a situation is that people who give tips in the name of free in social media (Telegram, Facebook and Whatsapp) take trade in their account according to them and then what happens? damage only. Such people also give you tips on investing in the stock market, who do not know anything about the market.
Similarly, we invest in TV by watching news or tips. We do not understand one thing that all these people are sitting as advisors who show you the dream of giving 40-50% return, then it is also in their own account. take trade or not because an advisor can never give you any benefit because he does not have his money in it, he will tell you to BUY and SELL from anywhere.
Therefore, if you are not capable of analyzing the market by yourself, you do not understand the market, then it is better to choose a professional trader than to choose someone, an advisor,
How to Recognize who is a Professional Trader:
- First of all, try to know his knowledge
- Understand the pattern and method of its working and earning returns.
- Check his trade book, trading statement, ask for a pdf copy of the trade book
- Don’t expect high returns with that you want 40-50% returns for the month
- If it is possible for you, then have a meeting with him, but it is not so necessary.
The advantage of joining a successful and professional trader is that he has complete knowledge, understanding of the market as he takes trades in his own account.
But if you take tips from an advisor, then they only have to sell services, they do not have any money of their own in the market, they do not even have any knowledge of the market, due to which only you have to suffer.
Whereas a professional trader will also give you the same advice that he will take trades in his own account and when he is taking a risk for his own money, then it is obvious that he must have some knowledge.
Lack of knowledge of Risk Management:
Avoidance is always better than cure. You must have heard this many times. This applies as much to money as it is to your health. Strong risk management is the preventive measure that can ensure that you do not face financial problems. Actually, risk management really means managing risk.
Risk reward ratio means that you have to set that if you wait to take a loss of 1500 then at least wait for a profit of 2000-3000 and you should follow this thing very strictly.
But in reality, all those who have made losses in this market, what they do is that if there is a loss, then they hold it and keep increasing their loss so that the entire risk-reward gets spoiled and their portfolio is destroyed. A big part is lost.
On the contrary, if we see profit, then we get out of the market by booking a small profit. Whereas to become a successful trader, we have to reduce the exact opposite. If we have a loss then we have to exit with a small loss and if there is a profit then trail our stop loss and book a big profit.
Working without taking into account the risk-reward ratio means that you have not analyzed your risk management, you have not seen how much loss I have to take in a single trade, according to your investment, know that you have a total capital is of 1 lakh and in my one trade, I made a loss of 10-15 thousand, 20 thousand.
Whereas what you should do is that first of all, do 1 lakh investment in at least 3 parts, it means take 3 trades of 33-33 thousand.
Now in a trade, you have to take a maximum loss of 2500-3000, due to which your risk becomes diversified. So you have set that to that will be 2500-3000 only but you can cover this loss by taking another trade.
Lack of Understanding of Fund Management:
Money management or fund management simply means that you have to understand that in which asset you have to invest how much, how much is the risk in that asset, for how long you have to invest.
One of the reasons for the loss in the stock market is that people do not decide the amount of their investment. This is also a big mistake.
Because the investment amount is not fixed, they invest most of their money in the stock market. Due to which they do not have enough money even for emergency times.
And when they need money, that’s when the market is going downhill. Due to which they have to withdraw money from the market by making losses.
Never Test The Depth Of River With Both The Feet.
– Warren Buffett
Therefore, keep some of your money in fixed interest investments as well.
When it comes to money management, the first few questions you should ask yourself are:
- Will I need the money I am investing in an emergency?
- If there is a loss of this money, then my house and my life will not be disturbed?
- What are the chances of loss in the asset in which I am investing, how much is the risk?
- How much of the money I am investing can I take at a loss?
Overtrading simply means that you do not have satisfaction, you are not disciplined, what do most of the losers do that if they took a trade, they lost it, then immediately without understanding the market, they seem to recover this loss. And without doing proper analysis of the market then take another trade in which they may have to face loss again.
The second aspect also happens that you took a trade in which you earned some profit, for example, let’s say you have earned 3000 but you do not have satisfaction, you keep doing BUY and SELL throughout the day in order to earn more profit.
And what happens at the end of the day is that you end up with a total loss and have to pay brokerage, taxes separately.
Whereas what a successful trader does is that he plans his entire day that I have to work for only this much profit and so much loss.
Like if I will make a profit of 2000-5000 then my whole day’s work is done or if I will lose 1500-2000 or 2500 then I do not want to trade.
Investing at the Wrong Time:
Investing at the wrong time. Often people buy clothes when there is a discount or sale on clothes. But when there is a recession in the stock market i.e. sale is engaged, then because of the fear of loss, they also start selling the shares of a good company.
Whereas they should buy shares during the recession. Because even the best company’s shares are available at a very good discount in the time of recession in the market.
I will tell you how to be rich. Close the door. Be fearful when others are greedy. Be greedy when others are fearful.
But people do the exact opposite of this. When the market is moving fast, then many stocks move by different percentages like 5%, 10%, 15% every day. Seeing such a boom in a day, more and more people invest in the stock market at the same time.
Due to which they get good profit in some time, but soon that profit turns into a loss. Because they would have invested by buying the shares at a very expensive price.
For this reason, they do not have money during a recession and big companies are available at very good discounts, then they are not able to buy shares. That’s why when the market is very fast, then everyone is buying, don’t buy shares seeing this.
Rather, after analyzing different companies, buy shares only at the time of getting good discounts.
Caution: Do not invest in any company even if there is a sale in the stock market. Rather, invest only in a good company you have found during a downturn in the market.
Focusing on QUANTITY instead of Focusing on Value:
The biggest mistake people make in the stock market is that people do not pay attention to the company’s valuation of the stocks before investing, most people hold on to the high quantity of penny stocks or low price stocks.
When they do not have any information about the business, product and services of those stocks. What happens is that their stock keeps going around the same price for a long time or going further down which will give negative result to your portfolio. With this, always pay attention to the valuation of the stocks first and whenever there is a price discount in the market, then invest only in quality and value stocks.
We all have heard one thing that “RICHER GETS RICHER” (only the rich become richer) and this is also true, but when it comes to buying shares, we invest money in quality stocks.
One thing to think about is that the company which will be doing good business right now, which will have money, which will have good value, the same company will give good return in future also but we do not keep this in mind and then our portfolio becomes negative.
Thinking that these stocks have become expensive, people left stocks like MARUTI, MRF, EICHER MOTORS, Hero MotoCorp, Bajaj Auto and are repenting today.