In the complex world of trading, many investors come with dreams of wealth but are often overshadowed by the shadow of losses. In fact, at the root of trading failures, the core factors are concentrated in the following three key aspects.
1. Basic understanding is shallow, hastily stepping into dangerous waters.
Today, the threshold for entering the trading market is surprisingly low. Whether in stocks or futures, people can easily complete account opening with just an ID card and a bank card. Moreover, with just a few thousand yuan in capital, they can 'try their hand' among numerous trading products. However, this convenience hides enormous risks.
A large number of investors rush into the market with almost no knowledge of trading products and rules. They are unclear about the differences in margin requirements for different futures products and do not understand the fees associated with stock trading. They have a half-baked understanding of some products' trading time restrictions and price fluctuation rules. It's like driving a car on the road blindly without knowing the traffic conditions—how can accidents be avoided? This severe lack of basic knowledge leaves them defenseless in trading, making losses inevitable.
2. Lack of skill reserves, trading relies entirely on luck.
Trading is by no means a simple buying and selling operation; it requires professional skills and rich experience, just like a doctor performing surgery or a lawyer litigating. However, in reality, many investors participate in trading hastily without undergoing systematic learning and training.
They cannot understand the market signals conveyed by candlestick charts, nor do they grasp the meanings and uses of technical indicators. In terms of fundamental analysis, they are even more lost, unable to judge the impact of macroeconomic data on the market. When formulating trading strategies, they have no clue, lacking clear buy and sell points as well as stop-loss and take-profit settings. Trading decisions often rely on baseless rumors or one-sided words from social media. This way of trading is purely based on luck rather than professional capability, ultimately leading to losses.
3. Severe deviation in expectations leads to a loss of balance in mindset.
Unrealistic profit expectations: Many investors have unrealistic fantasies about trading returns. They look down on annualized returns of a few or twenty percent, always fantasizing about doubling their capital in just a few days like the so-called 'gods' and making dozens or even hundreds of times their investment in a year. They inquire about unverified stories of getting rich quickly, overlooking the luck and risks behind these tales. Under these erroneous profit expectations, they blindly pursue high-risk trades and often suffer significant losses due to their inability to bear the risks.
Extremely low tolerance for drawdowns: When faced with trading drawdowns, these investors also have an imbalanced mindset. They believe that any trade with a maximum drawdown exceeding five percent is a failure, demanding that trades must be completely stable and profitable every day. This unrealistic drawdown expectation causes them to panic during normal market fluctuations, frequently making incorrect decisions. With slight losses, they hurriedly cut their losses and exit, missing subsequent rebound opportunities; with slight gains, they rush to take profits, missing out on larger profit margins.
Now that we understand the reasons for trading losses, how can we avoid losses and achieve profits? The answer lies in doing the following three things: First, deeply study and fully understand the market and products being traded, mastering their characteristics and rules; second, carefully build a trading system that suits oneself, clarifying each step of the trading process and risk control measures; third, establish reasonable expectations for returns and drawdowns, maintaining a rational and calm mindset. Once investors achieve these three points, although it cannot guarantee big profits, it at least enables them to effectively avoid losses and steadily realize asset appreciation in the long run.
