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Why 99% Retail Traders Fail in Stock Markets, What Should you do to Succeed!

If you are here to get rich overnight, the article is not for you. But, if you are looking to learn the art of investing and make a fortune in long term, you are at the right place.

These are 5 factors because of which, retail category loose money.

  1. Incomplete or no research: Most of the traders in the category, take a position either on friends and family recommendations or news. A complete holistic research is needed to take any position in the stock market. Most of the traders are working in some or the other place and do not spend enough time before taking a position in the markets.

  2. Lack of Discipline: A trader needs to keep aside emotions when trading. But we are humans and this is difficult, so we involve our emotions with our positions and do not book loss at right time and maybe book gains early or give in on greed and do not book profits at right time.

  3. Flow of information: It is very important to understand that this category of traders gets the information last and is the last one to enter and last one to exit. Hence, these traders can’t beat institutional traders in terms of returns.

  4. Buying in FOMO: There is a very famous saying “Be greedy when others are fearful and fearful when others are greedy” but often retail investors and traders fall into the FOMO trap and buy stocks that is rallying and sell good stocks on a noisy news.

  5. Unrealistic expectations: There are no shortcuts to success, people start trading with an unrealistic expectation of getting wealthy very fast and start buying options or do margin trading. This is a beautiful opportunity for big whales to eat small fishes.

What should you do:

If you think you can’t devote your majority of time in markets, outsource the work to experts.

Invest in right mutual funds, start SIP and do it religiously. The best investment is investing in yourself. Find your core expertise and try to grow in your field and invest surplus amount you make through this growth.

Does this means you should not trade? Nope, if you have savings, don’t miss fundamentally strong stocks when these are available for cheap. There are certain events where good stocks price take a hit, not because of its core business operations but because of short term problems. This is a good opportunity to take position in these stocks and go for swing trading.

Ending with a thought: 1.12^38 > (1.5)^27 * (0.5)^11

Which means the fund manager clocking consistent nominal returns for 38 years will outperform another fund manager having high volatile returns with equal positive and negative bias and 70% win rate. Hence, consistency and discipline is the key to build wealth.

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