There are several reasons why new traders lose in the stock market. Some of the mistakes they make are as follows:
a. Not having a proper plan for trading: They want to trade just to trade. Without proper planning, new traders won’t know the direction of their trading.
b. They often think that the higher the amount, the higher the returns. But the opposite is also true, and they ignore this. A higher amount of capital means a higher chance of risk of losing capital. Therefore, choosing to trade with only that amount of money that one can afford to lose is essential.
c. They trade with guesswork, which does not work in the stock market. Guesswork and speculation mean lack of research, and lack of research means one has to lose.
d. They do not diversify their portfolio enough, which is a huge mistake. Diversifying one’s portfolio means the chances of loss get reduced. When a particular industry fails to perform well, it might cause huge losses to traders. So, it is better to diversify the stocks.
e. They fail to choose the right broker: If a trader selects a broker solely on the basis of someone’s recommendations or that a broker has lots of negative reviews, it will affect a trader’s trading.
f. Negative emotions while trading: New traders often suffer from fear, anxiety, FOMO, etc., when trading in the stock market. They do not realise that these emotions affect their trading badly.