5 reasons why people lose money in intraday trading.

1. Absence of research:?Having a glance at the stocks won't give you the information about the backdrop of the stock or the value direction, news, corporate declarations, and the backings and protections of the stock.

Solution: Analyzing the stocks concerning technicals and being 100% clear on the numbers of your trading system. Some of the most important parameters in your trading system are -Winning percentage, losing percentage, risk-reward ratios,position-sizing, maximum losing streak, maximum winning streak, and maximum drawdown i.e (maximum loss a system may have at any given point of time.

?When you play roulette in casinos, the edge is always negative, so you always lose the money and the casino wins.

How does one calculate edge?

Let’s take the example of a coin toss ;

The probability of profit of winning is 50% if you call either heads or tails all the time over ten coin tosses.

Number of coin tosses = 10

winning % = 50%

Reward : risk = 1 : 1

thus,

Edge = (50% * 1 )- (50% *1)

0.5 -0.5 = 0?

Therefore edge is 0?

In trading, we need to ensure we have a positive edge?

We can make it positive by increasing our reward or by also increasing our winning percentage.

2. Marrying a position

It is vital in intraday trading to have a diversified portfolio to ensure a balanced allotment of funds. Inexperienced traders often focus on a few options rather than a variety-putting all their capital into a few possibilities tends to put them in danger. They tend to trade with an emotional attachment to the position.

Getting emotionally invested in a particular position leads to people being stubborn and having blind faith in it. This is a common error that leads to people losing sight of their actual trading plan.

Solution: It's better to use logic with trading and remember to not put all your eggs in one basket! Buy a variety of positions to have a solid backing.

3. Chasing the market?

When traders enter a market or exit a position to profit from an occurring development or trend. “Chasing the market” is a herd mentality and generally involves buying in at a high price or selling at a low price after a sell-off.

Solution - Maintain a trading journal and plan in advance what you’re interested in buying. Gain technical knowledge regarding the fluctuations of price and their causes for it.

4. Overtrading

Overtrading is when traders trade with recklessness and greed without a? clear system and continue to trade, even after losing money in an attempt to recoup those losses which results in them draining their entire capital and once the market is closed, they’re left with emotional scars.

The worst part is, that these people who’ve lost money without learning, without having profit in the system just abandon the markets thinking it’s a gamble or they’re negatively cursed.

While the reality is that the markets offer tremendous opportunities for wealth creation as well as cash flow if done correctly

Solution: Overtrading occurs when people zealously trade without any proper flow or plan. So ensure that you create a proper system and plan for trading, strategies, and limiting your losses. Trade logically instead of emotionally and be clear about the system.

5. Letting losses get too large

People get reckless with trading, have insufficient knowledge, and fear missing out on the markets. They lose and they don’t stop, they try to recover the profits from the past and in turn lose more. People tend to become attached to the stock and remain in the hope that at some point they'll recover. There are wins and losses in trading, but it is essential to know how much loss is renewable.

Solution: A reasonable rule of thumb for novice traders would be to limit yourself to a 1% loss per day (2% for smaller capital) rule-and as soon as your equity dips lower than this-stop trading.?

Stop, reduce capital, and come back with ? of capital-consider taking a short break from trading. Close your outstanding positions and spend this time on the sidelines, regroup, analyze the problems, observe the markets and confidently enter the next month, having learned from your loss.

All in all, a majority of the problems beginners face lie in psychology! You'll find that your errors can be fixed with the right mindset and, logical not emotional. Do not risk trading with capital that you can’t afford to lose as everyone is prone to errors, one must have sufficient capital to survive the same.