On the fatal causes of stock market losses

On the fatal causes of stock market losses

Most retail investors are willing to study whether there is a banker in the stocks they buy, and feel that the stocks with the main force are easier to make money. But in fact, whether retail investors or main players, buying and selling stocks is to make money, and timing is still very important. Timing is sometimes more important than choosing stocks. Here, I want to share with you some reasons why the stock market lost money for your reference.

Wrong attitude and attitude towards loss

Once any investor loses money in the transaction, not only his own account funds are lost, but also his self-esteem is hit. If he can't understand the loss correctly, he will feel guilty. If he loses money continuously, he will even feel inferior, and then he will enter a state where he can't make mistakes, that is, he is not allowed to make mistakes, which will make the transaction highly nervous. Once you make a mistake, you will feel unwilling to admit your mistake, which will eventually lead to a big mistake, resulting in the psychology of quarrelling and gambling with the market. Once investors enter this state, there is no chance to make a profit. The fundamental reason for this wrong attitude and handling method is that investors have not correctly understood the phenomenon of trading losses.

How to deal with right and wrong

1. Make your own standards.

The first thing you set is a right or wrong standard that suits you, not a right or wrong standard that suits the market, because the market can't give you a clear right or wrong standard at any time. If you make a sell order, graphically, you can think that the trend may rise after rising by 30 points, but from another point of view, you may think that it may rise after breaking through the panel, and you will have to bear the loss of 50 points if you break through the panel, but if you look further, you can also think that the rise can only be confirmed by a new high, and you need to bear the loss of 80 points at this time. So, from the market point of view, what criteria should you use to judge whether you are right or wrong? Indeed, the market will not take the initiative to give you a criterion. The criteria for judging right and wrong can only be determined by adapting to one's own tolerance.

Is it wrong to get caught entering the market? The author believes that as long as the transaction does not reach the stop loss point, it will still be in the right state. If a transaction makes a profit of 10 points, right? It depends on the size of the market. If the market reaches 100, I think the transaction is still wrong. Right and wrong can not be judged by profit and loss, but by the quality of profit and loss. If you do something wrong, only a small loss and a big profit are right, otherwise it is wrong. The criterion for judging right or wrong is actually a question of how to set a stop loss point and whether it is strictly enforced. How to set the stop loss point is a problem that varies from person to person, but strict implementation is a discipline that should be universally observed.

Allowable error

If you don't allow yourself to make mistakes in trading, either you will be very careful, highly nervous and difficult to balance your mind, or you will make a big mistake because you don't admit your mistakes once you make them. This is a big taboo. It is normal to lose money in trading. You should take appropriate losses as the price and cost you must pay to make a profit. Opportunities are found, not found at a glance. It is an illusion to want to succeed without paying the price!

Only by allowing yourself to make mistakes can we have more trading opportunities, eliminate the fear of the market, truly seize the profit opportunities, and truly maintain profitable positions for a long time. Making mistakes in trading is not terrible. The terrible thing is that you don't insist that you are right. This is the most terrible!

3. Observe discipline and implement standards.

Abiding by discipline and strictly implementing the standards of right and wrong formulated by ourselves are the prerequisites for correcting mistakes and profiting from transactions. After entering the market, the only thing you need to do is to use your judgment standard to judge whether you are out or holding. Once you reach the stop loss point, the only thing you can do is to go out, otherwise you must keep it until the judgment standard gives you a signal to leave.

Seven fatal trading mistakes

Fatal error 1 failed to stop loss quickly.

Successful trading, like a successful life, depends on how we control losses, not how to avoid them. If you really want to be a shrewd trader, learn how to lose money professionally by reducing losses. This is the key.

How to eliminate the mistake of no quick stop loss?

1, when things go bad, never start trading until you decide where you should protect your ship. As the saying goes, never start trading without a stop loss.

2. Always stick to your preset stop loss. Needless to say, this industry, but only a few ambitious traders can have enough self-discipline to do this. Why is this so hard to do? Because going out at the stop loss point is a clear admission that you are wrong. This kind of behavior will not bring a feeling of warmth and pride, nor will it build a person's confidence. But the real master trader has learned to overcome these difficulties. They have become experts in stopping losses at dizzying speeds. They do this because they have an unbearable feeling about positions that are not suitable for them, and they will kill them once trouble arises. (Release from unconstrained position)

3. If it is difficult for you to stick to the stop loss, get into the habit of selling half the positions first. This method satisfies two opposite impulses, the impulse to get rid of the falling position and the impulse to give the falling position a chance to rise again. By splitting the problem in half, traders are usually more awake and focused. Psychologically, traders find their situation less difficult, so they will feel better. How to deal with the remaining half of the problem still exists, but because half of the problem no longer exists, it is easier to come up with feasible solutions.

Fatal mistake 2: counting money

Constantly monitoring the ups and downs of trading is a destructive activity, which may take away traders' profits for many years. This process, usually called "counting money", not only deepens the fear, but also increases the uncertainty of every moment, making people unable to concentrate on the correct technology. And the right technology ultimately determines how much profit we can make.

Focusing too much on the idea of "where are you" instead of doing what you should do will lead to unwise, unfounded subconscious and too fast reaction. On the contrary, traders must make sure that every step of their technology is correct. If they follow the technology correctly, profits will naturally come.

"Counting money" is usually a mistake made by traders who are not used to making frequent profits. It not only deprives traders of considerable profits, but also encourages long-term uncertainty, fear of loss and emotional imbalance that may lead to destructive behavior.

How to overcome the problem of "counting money"

1, set two protective selling prices for each transaction and sell all your positions. Every transaction you make should have an entry point and two exit points, namely, stop loss and target. Stop loss is for protection and the goal is for profit.

2. Only sell the position you hold when it reaches the stop loss point or the target point, no matter which happens first. Adhering to this principle, traders put the fate of each transaction on their own trading strategy, not on their own greed or fear.

3. When the desire to sell before any selling point can't be restrained, only sell half and keep the remaining half until the selling point allowed by the strategy. In this way, you not only satisfy your desire to sell, but also maintain the integrity of your trading strategy.

Fatal error 3: changing the time frame

There is no exact point between the beginning of one cycle and the end of another cycle, but it coincides at the intersection. This narrowing is to point out a very common mistake made by many market participants: buying in one time frame and selling in another. The problem of "changing" the time frame is only one reason for ignoring stop loss, which is our only protection against disaster.

By switching from one time frame to another, traders delay the ultimate sense of failure. Cover up their failure with a fragile plan and paralyze themselves into a fatal denial state by cultivating false hopes. Traders who make such mistakes are not suitable for trading, and the market will not tolerate their disguise for too long. In the end, the mistake of changing the time frame will erode the determination of traders, deprive them of the ability to think and act freely, and make them miserable victims forever.

How to eliminate the error of conversion time frame

This fatal mistake that changes the time frame cannot be allowed to exist, and it must be completely eliminated, because every time such a mistake is made, the level of traders will be lowered, and once the habit is formed, it will be difficult to break.

1, if you buy in a time frame, you must set your selling point in the same time frame.

2. When you are long (short), you can't adjust the stop loss downward (upward) (the exit point is 1), which is the main signal that you want to make a mistake when switching time frames. If used correctly, the guaranteed income can be adjusted upwards. But adjusting the stop loss downward will lose its meaning, making you even more reluctant to do what you set out to do. Once you take this action, you will do it again and again until the stop loss loses its ability to protect you from disaster. These two methods will easily prevent you from making the fatal mistake of changing the time frame.

Fatal error 4: Need to know more.

It is natural for us to need certainty before acting. But the fact is that the opportunity to get rich is always given to those who do not know more but can act wisely. The market is ahead, and big profits always appear before the facts come. People who want to know more before betting are always one step behind and always on the wrong side of the market. Only those who are not bound by the need to get more information can move freely. When they truly understand the wisdom of uncertainty, they will become chart makers, not chart readers. So the point is, you can't take wanting to know more as a transaction, because by the time you know all the facts, the opportunity has already run away.

"Need to know more" is a fatal mistake, which makes people not take action when they should, and encourages you to take action accurately when they shouldn't. We play luck, not fortune telling. A trader who waits until all the facts are clear will never succeed.

How to eliminate the mistake of "need to know too much"

1, don't follow the good news.

2. Use charts to form your buying and selling decisions.

3. If you find yourself hesitating because you want to know more, stop and ask yourself, "Is what I am looking for necessary for trading, or am I just looking for a more comfortable feeling?" This problem will put an end to hectic behavior.

Fatal mistake five: too self-righteous

When the market is very favorable to you and everything is favorable to your transaction, you can't escape the hand of careless destruction. When a series of profits make your wallet swell, you must do your best to protect your hard-won benefits and keep a clear head that can help you generate these benefits. Unfortunately, every trader will eventually realize that continuous profit usually lowers one's alertness, because complacency has taken advantage of it.

Many novices don't understand this because they don't realize that some characteristics of the familiar market environment will change after long-term profit. In fact, many times, the market environment and the opportunities it brings have changed. Now it is not the market where traders start trading on the first day. It has different characteristics and a series of different opportunities. However, just when the market is about to change, those traders who have no experience in receiving newspapers begin to become complacent, raise their chips and take risks. Unexpectedly, the environment that brought him a series of victories no longer exists.

How to eliminate the mistake of "being too self-righteous"

Learn to take a step back after each successive profit.

1, reduce your trading chips by half.

2. Reduce the transaction frequency

Fatal mistake 6: the wrong way to make a profit

We all know that money can be obtained in an honest way. On the other hand, we also know that it can be obtained by dishonest and shameful means. The end result may be the same, but the means of obtaining money may be very different. This is like asking a heart surgeon and a drug dealer whether they can get equal respect because they both earn a lot of money. Of course not. The same is true in the trading world. Many novice traders don't realize that it is possible to make a profit in the market in the wrong way. Think of people who don't insist on protective stops at a certain position. Doing so may eventually make money in this transaction. What these people don't know is that they have committed crimes against themselves, and punishment will follow. These people have tasted the wrong success, and the market will recover these undeserved profits sooner or later. What do you think these people will do next time they trigger a protective stop loss in a transaction? Ignore the stop loss again, of course.

Incorrect ways to make money will reinforce bad habits and irresponsible behavior. Once traders taste success from the wrong method, they almost always repeat the mistake until the wrong method touches them and gets back the money they got from the wrong method, or even more.

Master traders are not interested in market luck. They don't pursue, hope or enjoy the benefits that will still be brought to them despite their mistakes and wrong transactions. Ideally, a truly profitable trader has no gifts in the market.

Correct actions and correct methods will not always bring profits to honest traders, but one thing is certain: repeated wrong actions will eventually lead to the demise of a lazy trader. Make sure to make a profit in the right way.

How to eliminate the mistake of making profits in an incorrect way?

1, after each profitable transaction, review every link of the transaction: buying, initial stop loss setting, waiting, fund management, selling, etc. And find out the mistakes and violations of the rules. A key question is how the winners feel about these transactions that are not really profitable. Whenever traders allow themselves to feel like winners in a transaction, but in fact it is not a real victory, they send a message that what they do is right and good. This will strengthen the wrong behavior and encourage one to repeat these mistakes. Needless to say, mistakes will eventually catch traders.

2. Be aware of two vices-hope and holding. Are two criminals who made profits in the wrong way.

Fatal mistake 7: rationalize it

Let's see if you can find out what the trader did wrong in the following scenario. An excited trader found a good trading opportunity in an intraday trading chart. Everything seems to be appropriate. After an afternoon of consolidation, all market indicators began to become active on a particularly positive trading day. Then, I felt the point of entering the market. Traders perform operations and conclude transactions. After a short transaction, it suddenly began to turn around and spit out short-term profits. Now it is consolidating at the entry point. "What's the matter?" The trader thought. "This is so funny!" The rally in the afternoon has now completely evaporated, and the market is obviously weak and retaliatory. Now his stop loss is only one point. Traders began to study, looking for clues about why the perfect variety began to decline. After checking all the news (no news), the trader checks the daily chart. "Yes, the daily chart looks good. It's really good. " He commented: "I'm going to move my stop loss to the lowest point today. Yes, it is impossible to fall below this point. " 10 minutes later, the new stop loss was broken as the perfect variety entered the market and fell to the South Pole with his money. The trader was confused. He closed his position and couldn't believe how much he had lost. What did the trader do wrong? Do traders ignore the weaknesses of developing markets? Not exactly. Traders made three fatal mistakes:

1, conversion time range. Selection and buying are based on a complete intraday basis, from the intraday entry point and the strict intraday stop loss point to the daily chart, and adjusting the stop loss based on the daily line completely changes the initial transaction, that is, the initial risk/return ratio tilts in the direction unfavorable to the trader.

2. The transaction has been planned, but the transaction plan has not been implemented. It is absolutely necessary to stick to the original plan, no matter what the time frame is. Failure to implement the trading plan will make you popular in the market and weaken the necessary confidence in effective trading.

3, rationalization. The other two kinds of wrong psychological basis, rationalizing the change of time frame and plan, are a form of denial, denying the fact that is happening. Honesty-real honesty-no matter how ugly the truth is-will put you above most market participants. They can't arouse their strength from their hearts, but prefer to keep their place and blame their losses on something or someone other than themselves.

If you want to approach the market with wisdom, it is necessary to plan your every transaction. Most failed traders drive by feeling and don't even know how to make a trading plan. However, it is a more serious sin to plan your trading but not to trade as planned. Those who know how to do it, but don't do it, deserve this knowledge the least. The market usually pays attention to giving them what they deserve: losses. Rationalization is the culprit behind this and many other fatal mistakes. Because most people are naturally too optimistic, it is difficult for them to end the events that bring them losses and pains. When it comes to taking action, it can be said that many people can't gather enough determination and courage to jump. Instead, they started the rationalization process. This process of persuading yourself not to do the right thing will eventually make traders leave the game completely.

How to eliminate the mistakes of rationalization?

1, the first trader must know that he is rationalizing. The key signals you tell yourself not to take action are as follows:

Ask "why" the variety will behave like this. The reason behind a variety's behavior is meaningless to the trader's planned behavior. For traders, the correct way is to sell first and then ask why.

Check the news. Knowing the news itself is not a bad thing. However, when verifying that the real purpose behind the news is to postpone the planned action, it is only an escapism.

Think with "possibility". When a stop loss or price target requires action, uncertainty prevails whenever traders start to use "possible". Sticking to a pre-made trading plan is almost always better than choosing an intermediate change. This insistence on what you have planned may not always produce the best results, but it will cultivate self-discipline, which is the most precious quality a trader can have. Once the trader finds the signal of rationalization, the only correct action is as follows:

Sell a position. This may sound harsh, but my years of experience have convinced me that rationalization often does more harm than good. If you find it difficult to sell all your positions, sell at least half of them to lighten the burden. In short, if you try to find a reason to keep your position, there is obviously no obvious reason. There is no reason to find the reason. A trader who holds a position without sufficient reason is a failed trader.

Looking for ways to make big money in the stock market from the reasons of losing big money

Summing up the reasons for losing a lot of money in the stock market, we find the following common phenomena, which are worth pondering by investors. If we can take this seriously and do the opposite, investors can go into the fog and try to make a big profit in the stock market.

Reasons for losing money 1: The mentality of most investors with high positions and low positions is often the last stage of the bear market. They are timid and only dare to buy in small quantities. However, with the upward movement of the stock index, investors' profits have increased, and they have begun to be bold, and often become bigger and bigger; At the peak of the bull market, some people even got hot heads and borrowed money to enter the market. This constitutes an important reason for losing money and losing a lot of money: low position and light position, high position and heavy position. It can be seen that in order to avoid losing big money and making big money, we must do it: "The low position dares to hold a heavy position, and the high position dares to leave." On the one hand, investors need to have a vision of the general trend; On the other hand, they need to have the courage to support everyone in the low position, and the self-control to be indifferent to small profits and have clear aspirations in the high position. From this point of view, if you want to make a fortune in the stock market, especially in the secondary market, you must not only have great wisdom, but also have superb cultivation.

Reason 2 of loss: No stop loss, a lot of money lost. Quite a few investors have turned from small losses to huge losses: they bought stocks and made money, but they turned into a draw; I wanted to make money before I went, but it turned out to be a shallow set; I tried to pull a book when I was shallow, but it turned into a deep set. After the deep set, one day I finally couldn't bear it, finally recognized the compensation and sold it at the floor price. Small profits and small losses become huge losses, which is how it evolved.

Among the above phenomena, although some investors don't know the general trend, there are also reasons why they don't know stop loss, are not good at stop loss, and have no courage to break a strong man's wrist. Generally speaking, every time the general ledger loses 10%, there is either a problem with the trader or a problem with the stock market. Investors can come here and reflect on the reasons for the loss.

Reason 3 of loss: improper investment. Judging from Yin's example, the important reason for the loss is improper stock selection. It can be seen that both institutions and investors have the problem of improper stock selection. Lack of basic investment ideas. It can be seen that when selecting varieties, in order to "avoid losing big money and strive to win big profits", it must be noted that high prices in the market have always been a taboo for investment. Choosing medium and long-term investment varieties among small-cap stocks and low-priced stocks is the way to win big profits.