You may have heard of the statistical data stating that 85% - 90% of most traders lose their money in the stock market. Honestly, ask any profitable trader and they will tell you that this data is inaccurate. The reality is that 100% of traders lose their money to some degree in the business of stock trading. The key factor here is that successful traders keep their losses at a bare minimum so that their profits heavily outweigh their losses over a period of time.
The Root of the Problem
When you take a step back and look at the demographics of stock traders, you'll observe that most newbie traders and investors get lured in the stock market with the illusion of astronomical profit and financial freedom. Just browse through social media and you'll come across "gurus" showcasing their lavish homes and shiny sports cars boasting on how cryptocurrency, forex, or stock options trading made it all possible. Then, when they get you hyped up, they will sell you their books and modules with the promise that you will get to experience it as well. IT IS A SCAM!
Consistent profitability in stock trading demands constant research, a well crafted strategy, emotional discipline and continuous practice in order to be sustainable. This is not a "get rich quick" scheme! The traders who are able to compound their wealth in the market are lifelong learners. They know that this takes time and that you have to commit to the process to be able to achieve some level of success.
The Hard Truth
Effective stock trading is similar to doing business. Dealing with losses is simply a part of your operating expenses as a stock trader. There are times that your trade analysis will not manifest itself in the market and the price will turn against you. If this does happen, your only way of preventing huge losses is to take a small loss at onset so that you can enter a more favorable trade later on. If you do this well enough, your profits will be compounded and your losses will be effectively mitigated.
Before You Do It
For the vast majority of people who want to build a solid long term investment, it is best to stick to an index fund and position at major market pullbacks. Many people attempt to trade and suffer devastating losses only to find out that a long term investment fund is the most applicable investment vehicle for them.
If you have stockpiled a lot of debt and is currently unstable financially, I highly suggest that you stay away from stock trading. When you are coming into the market pressured to generate quick returns, you will make impulsive trades unequipped to handle its volatility. So please, if you are not yet financially stable, work on your debt obligations first and manage your cash flow before even starting to place your money in the stock market.
If you are an entrepreneur or a corporate professional with a very demanding career, a long term investment through an index fund is the way to go. Active trading that leverages on short term time frames demand active monitoring and constant research. If your lifestyle cannot accommodate that level of commitment, then it is best to move to a safer low risk investment vehicle.
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