Retail investors are also known as individual investors; retail investors have an increasing impact on the market.
Anyone who doesn’t invest as a profession is considered a retail investor. Retail investors usually invest in stocks and bonds. Retail investors use discount brokerages such as Robin Hood or invest through an employer or other retirement plan. Investors now buy and sell stocks, options and funds.
Why Retail Investors Lose Money in Stock Market
As we have seen the huge growth in the stock market in some years. The participation of new retail traders has increased immensely during the Covid pandemic. And there are many different reasons why retail traders or beginners lose money in the stock market. The main reason is Human Psychology regarding the stock market. Many Traders think of the stock market as Gamble rather than treating it as a business.
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There are many reasons why the traders lose money:
Research about the company:
This is the first reason where maximum traders lose the money when they start trading in the stock market at their starting point and on the basis of their tips they just blindly invest in that stock without doing any research and at last they end up making a huge loss.
Making quick money:
This is the misconception. Beginner just wants to make their capital double within a short span of time. But the beginners are not even ready to invest in researching the company’s profile. They select the stock of any finance related channel recommendations. After that they invest a huge amount of money in that risky stock or penny stocks and wish to double their capital within a month.
The lose trade and cutting the profitable trade:
These are the elemental mistakes which beginner traders make in their early stages. To become a trader you have to be able to follow the proper Risk to Reward ratio. Because trading is all about research and probability and statistics. They keep on taking the losing trade forward in the dream of making that trade profitable. They cut the winning trade early without trailing the stop loss.
Short term trading:
People think that getting trades profitable makes them successful. When you trade with margin the one stop loss is enough to wipe out your whole account. We can directly start trading in the derivative market .And after that the revenge trading starts where they think they can recover their losses.
They want to grow their capital as much as possible. Traders rush to profits or make trading decisions in a hurry which is the reason why they make losses in intraday trading. Many traders profit before deciding their price targets or stop loss. Also being impatient and changing trading strategies frequently are the biggest mistakes that intraday traders make.
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