In a nutshell, online stock trading is like any other business. Take a sum of capital and put it to risk, hoping that it will yield a positive return. The trick is to put that capital into something you believe in…this gives you a strong probability of getting that positive return.
So many traders get consumed about the money early on. Of course, the money can be great…but you can’t put the horse before the cart. There is a process involved in developing into a successful trader and becoming really efficient at online stock trading. That includes learning how to execute trades, generate ideas, position sizing and risk management.
So why do so many traders fail?
No clear plan
Well, most have no plan whatsoever. They buy and sell stocks aimlessly. Maybe someone popular got in the position and they are tagging along. Maybe they heard a rumour and didn’t bother to validate it. They can’t clearly explain what their edge is in online stock trading.
Missing exit strategy
Now, if you can’t clearly explain your edge, how are you picking your exits? You probably have no clue on when to exit the trade. Successful traders have their exits already mapped out before they place the trade. They use that exit to size their trades correctly. Some traders will buy a stock, hope it goes up…but if it doesn’t, they don’t have a clue what to do next, causing them to panic and either sell out at a bad price or hold on and let things get worse.
Importance of having a mentor for online stock trading
It’s really helpful to have a mentor in online stock trading. Someone who has been through the grind, they can teach you what they learned from their failures and success. This will cut your learning curve in half. Some people think they can learn it all on their own and don’t believe it makes sense to seek help. Again, that is a loser approach. You need to be surrounded by other like-minded individuals to discuss and learn from each other.
Study your past trades
Successful traders put in the work. They study all their past trades. Analyse what they did right or wrong, and try to figure out what they should do next time if a similar situation occurs.
Most traders don’t take the time to journal their trades or analyse the trading day. It’s groundhog day…literally everyday for them, making the same mistakes over and over again. Instead of complaining, they should be studying the best and worst trades of the day (even the ones they didn’t make), trying to identify if there were any repeatable patterns.
Research the stock
Not only that, but they stay on top of the market. They are aware of any major economic releases or events surrounding a company. They don’t let ignorance be the reason why they got a trade wrong. Traders who fail don’t bother to look if there are any headlines surrounding the stock they are online stock trading, they don’t sift through research reports or SEC documents.
The requirement to becoming a successful trader can be mapped out. In fact, it’s a process that can be learned. However, most traders either lack direction or don’t take these factors into account. They get caught up with what they see and hear about on YouTube videos, how easy it is to make tens of thousands of dollars in the market. If it was that easy, there wouldn’t be any opportunities. The reason why most traders fail is that they fail to grasp all the work it takes to becoming a top player in online stock trading.