I lost thousands of dollars in the stock market, blew up three trading accounts, and as a result, I had to deal with depression. After years of unsuccessful trading, I was helpless and asked myself questions like: What can I change to turn my trading around? What is it that makes 95% of traders lose money, and how can I get into the successful 5%?
If you are in the same situation I was a few years back when I kept losing money in the stock market, you may find your weak spot in this article and eliminate it forever! I will show you my entire thought process and the research I did over the years to prevent you from an awful and time-consuming trial and error period where you lose even more money.
1. Are you an investor or a trader?
As many people that are new to the stock market, I could pick any stock, preferably a company that I know and love, buy it and hold it for a long time with the hopes to make a lot of money. So this would make me an investor, not a trader.
The market loves you for being an investor, as all the market wants is your precious money. Professional traders also have invented the term ‘dumb money’ for retail stock market participants like us.
Now there is nothing wrong in being an investor as there are many professional investors that make plenty of money like Warren Buffett, the most successful investor ever. He made billions buying and holding popular companies like Coca Cola, Kraft Heinz, and many others. Did he all do this just because he loved the company or heard some good things about it?
The short answer is no he did not. Warren Buffett is a genius when it comes to analyzing a company’s fundamentals with all its nitty-gritty details. He puts weeks if not months into it.
So ask yourself this question: Are you doing your due diligence when it comes to analyzing a company? Do you have a degree in finance or a fantastic skill that helps you analyzing these companies? – I surely did not, and I had no interest in doing this. I could have listened to one of these analysts that tell you to buy a stock and hold it for a few years, but how could I remotely trust them to be unbiased?
After digging deeper into the world of technical analysis, I recognized very quickly that I wanted to move away from being a dumb investor and step into a more logical way of trading with day- and swing-trading. Even though I also struggled at first understanding this new way of trading (which you will see as you continue reading this article), I finally started to make money consistently.
2. No plan, No gain
The thing you realize fast when you start to trade on technicals is that you need to make yourself a plan before you enter a trade. You can learn patterns, support/resistance, and zones and indicators all you want, if you can’t control your risk, you never going to make it in the stock market.
A plan involves you to set, and entry and two exit points (one being your stop-loss and one being your profit target) once you create your plan stick to it no matter what! I made the mistake of not respecting my stop-loss several times, and I even averaged down, which only increased my losses.
My emotions tricked me and made me abandon my plan, even when I had a clear idea of what I wanted to achieve. Check these tips on how you can control your emotions that helped me get back control over my trades.
3. Who can I trust with strategies?
There are a plethora of trading strategies on the internet. Finding the right strategy and adapting them to everyday trading was one of the hardest things I ever did. I mean it’s the internet, who can you trust? Who does not want to sell you a fantastic course that will miraculously bring you into the profit zone? Some chatrooms even seemed that they only exist, so that the guru who created it can push the price of the stock with all the fools buying into it.
Following gurus brought me to a fundamental conclusion: Never listen to other people for buying or selling advice!
It required me over a year to find the right strategies that worked. Just be aware that all of them can fail as this is just how the market works, nothing is 100% consistent. As long as you stick to your plan, you should be fine, though.
4. I watched the wrong stocks 🙁
Do you know the feeling of falling in love with a stock and miss the party that is going on in others? You are not alone! It even went so far that I did not only miss the party; I also placed trades on the stocks that chopped around and gave me a loss.
This fear of missing out happened to me so many times that I tried to do some research on how I can find stocks that I need to put on my watchlist or even better something that notifies me as soon as there action going on in other stocks.
I found various chatrooms that helped me stay up to date with stock moves. The only problem was that it heavily depends on other people notifying you. Most of the time, those people informed everyone too late as they were occupied getting into the trade themselves or nobody was notifying me at all. Free chatrooms are great don’t get me wrong, but I was missing control and consistency.
Especially when you are day-trading, there is almost no way around a good scanner that notifies you real-time about stock movements. I compared some of the best scanners out there until I found this scanner here that allowed me to set up notifications that exactly fitted my trading style.
5. My broker is killing me!
My broker works against me! Every time I hop into a trade, it goes against me, so the broker must be rigged somehow! Did you think the same when trading?
Blaming my broker for my lack of knowledge was one of the easiest exercises. But could there be some truth to it?
While there is no real evidence that any broker is working against its traders, there are other things that were holding me back from succeeding at the time. These reasons certainly convinced me enough to try out other brokers. Let’s take a look at what could be possible reasons your current broker is terrible for you:
- Commissions can rob you blind! I used brokers that charged me hundreds of dollars per trade. How could I possibly succeed like this? Those commissions made losing trades even worse.
- Don’t put yourself up with terrible charting tools! Charting tools need to be fluid, easy to handle, and help you to give a good overview of your trade. Bad charting software can make all the difference. I even caught myself using the tradingview.com charting tools to plan my trades just because they offered overall better tooling than my broker.
- Execution speed is king! Some brokers take several seconds to execute a trade, which you would agree, is very unfortunate. You could get filled at a terrible price depending on how fast the stock moves or even miss it as the price already passed your limit order.
- Lack of shares to short-sell! Having more options to trade stocks in the opposite direction helps you to not force trades against the trend. When I saw a stock moving down heavily, I always tried to catch the bottom just because I was not able to short the stock, which also made me lose money.
Over the years, I tried out various stock brokers to see if any of the points mentioned above fit my trading style. I found one of these brokers here to be the best fit, especially when you are a beginner. I would strongly suggest that you try out as many brokers as you can. It has to fit you like a shoe that you wear daily, and I think you would not buy a shoe that does not fit right, would you?
The critical takeaway is that it will take time to find your way in trading as long as you are willing to try out different approaches. Don’t trade the market with a large amount of money. Take a step back, change your strategies, and trade small chunks of money until you get profitable on a consistently.
If you are unsure where to start or what to change, try out our free stock trading guide where we show you strategies that work for us every day.