Achieving success in trading can offer numerous opportunities for people in the real world. You can work anytime, anywhere, and be your boss. Moreover, you can have an unlimited potential for profit in your journey. These factors lure millions of people worldwide to start trading and attain financial freedom. However, as you might have noticed, there aren't many millionaires in the trading industry. Why is that? There is another side to the coin. Although trading has unlimited profit potential, only a few can extract the opportunity. 97% of trading accounts lose money, 2% make the same as an average annual salary, and only 1% of traders are profitably doing better than the average. So, forget about bloggers who brag about their luxurious lifestyle brought about by trading. Most bloggers usually earn more money via blogging than trading. In this article, we'll talk about trading in real markets and give you our perspective on why it's not easy to make a lot of money.
You should have a trading edge.
Trading psychology is an important aspect of trading, but it's important to remember that without a statistical advantage, psychology alone won't be enough to make you profitable. Even if you manage your risks and emotions well, you still need the odds to be in your favor to be profitable in the long run. Trading is a zero-sum game, which means that the money one person loses is gained by another. Since everyone in the market is equally willing to make money, you need to have some kind of advantage to be competitive. However, gaining that advantage isn't always easy.
Many novice traders often face two common problems at the beginning of their trading journey. Firstly, they may have limited starting capital, which can restrict their growth opportunities in the market. Secondly, they may feel an urgency to make a lot of money from the start, which can be dangerous for consistency.
For instance, a trader may come to the market with a well-designed trading strategy. However, their greed or fear of losing may cause them to deviate from their initial rules, resulting in a loss of their competitive edge. This can occur when traders are hesitant to close losing trades and wait for longer for the price to come back, or close profitable positions too quickly to realize profits. In both cases, the opposite should have been done.
It is important to understand that losing trades is a natural part of trading, and it only takes one good trade to make up for all other losses. Traders should not expect to be right 100% of the time and should be willing to cut their losses without hesitation. We will continue to share common mistakes traders make at the start of their journey and how to avoid them. For more information, please follow us and stay tuned!
P.S.
An important concept in finance is the Compounding Effect, which is a fundamental principle of wealth building. For instance, if your capital grows by just 1% every day, it may not seem like much, but over 365 days, your capital will be multiplied by a factor of 37.8. This is truly remarkable, don't you think?
Stay tuned!