Many traders decide by looking at the price chart. For this reason, they make mistakes. They should understand, if they don’t do the firm analysis on the market, they can’t achieve their goal. So, they should focus on researching the different market factors. By analyzing them properly, they might take the right steps for their trading.
However, if you want to avoid major loss, you have to learn how to deal with the bearish and bullish trends. Otherwise, you might face a financial crisis.
In this post, we will discuss why traders face massive losses in the market. We hope it would help you to identify the major causes and give an idea of how to deal with these. So, let’s know about these.
Using the bigger position size
At the beginning level, traders must not use the bigger position size. Because, if the market crashes, they might face a big loss. So, as a retail trader, if you don’t want to avoid the devastating loss, you should not use the smaller position size.
As a result, you might face any big troubles in the market. Never trade with high risk even though are certain about the trade signals. Remember, nothing is absolutely in the investment business.
Open and close the position late or early
Most of the newbies can’t open and close the position at the right time. Because of this, they fail to make large profits. Some of them don’t bother about the opening and closing times of the trades. They just buy the position at the support level and after some time, they sell it at the resistance level. But, being a trader, if you can place the trade at the right time, you might make large profits.
But, if you close the position late, you may face a big loss. That’s why you should learn to manage your trades systematically like the skilled Aussie traders at Saxo Bank. Only then you can expect to make a consistent profit.
Always think about profits
Some newbies always think about profits. For making large profits, they break the discipline and face a massive loss. Being a trader, if you place the trade without analyzing the market, you might face big problems. So, you should consider the current situation during the execution of the trades.
For becoming a successful trader, you should know about the professional approach. Because, if you can trade professionally, you might reduce the loss. However, try to improve your process for gaining success. But, if you always think about the outcomes, you might not get the rewards.
Neglecting the stop-loss and take profit
Traders should not neglect the stop-loss and the take profit because both of these help to maintain the risk-reward ratio. Bear in mind, by setting the stop-loss, you might limit the major losses.
But, as the newbies don’t place these price levels, they face a big loss. So, as a trader, you should know, how to place the stop-loss. Because, based on the different strategies, traders need to place the different stop-loss. Such as, in the day trading strategy, they need to use the tight stop-loss. On the other hand, in the position trading strategy, they need to use wide stop-loss.
If you are overconfident, you might not contemplate the risk factors. You may start to take some insane decisions and face big troubles. But, you need to remember, overconfidence can ruin your career. If the traders win several trades in a row, they become overconfident. And, they start to think, they will never lose the trades. Because of this, they start to take the high risk and thus face a big loss. Try to go with your plan to avoid the loss.
So, these are the primary reasons which are responsible for the major loss. If you want to avoid losses, you should follow the tips which are given. However, always keep in mind, you can’t avoid the losing streaks for good. So, you should try to limit the losses.