Many people who are trading, find they are not making money. This is not unusual and in fact, the reasons why you’re not making money while trading are probably fairly common. This is good news as it means that you can probably diagnose the problem and fix your mistakes to improve the situation.
Here are some of the ten most common reasons why you might not be making money while trading:
- Over-trading. This is mostly due to not having a solid trading strategy or not managing to follow it. It is important to have a trade strategy and only trade when a trade signal is present. Also make sure not to become over-confident and jump back into the market too quickly following a series of winners.
- Not Preserving Your Trading Capital. In order to be in a position where you can take advantage of good trade setups, you need to preserve your trading capital. In other words, hang onto your money and be patient until a good trade setup forms so you will have enough capital to take advantage of it.
- You Don’t Manage Risk Properly. Make sure that you manage risk on every trade. This means that you need to know how much you can lose on each trade and you need to stick to that amount on every trade.
- You Don’t Understand How to Place Stops. This is an important aspect of trading and can impact how much money you make. You need to place your stops logically so that even if you’ll win slightly less, there is more of a chance that you will still win. Don’t get greedy and risk losing.
- Your Account is Too Small for Trading. Many people who start out trading, start out with an account that is too small and that makes it very difficult to profit. It is better to save your money and to trade with an amount that will make a difference if you win than to start trading with too little.
- You’re Trading Too Big. Trading too big makes emotions run wild and chucks logic out the window. A trade should never put your lifestyle or trading career at risk.
- You’re Over-Analyzing. While it is important to trade based on knowledge, it is also a good idea not to read too many opinions before you trade. Trust your gut and learn to trade from experience.
- You Trade Based On News Releases. Many people delay trading due to a news release that is expected. Many times it happens that you hesitate and then the news pushes the market in exactly the direction you were going to trade and opposite to all the opinions you read.
- You Don’t Follow Your Plan. When the markets open, you need to make sure you have the discipline to follow the plan you made when the markets were closed.
- You Can’t Admit When You’re Wrong. If a trade is losing, admit it and move on. Don’t stick with losing trades in the fear of admitting a mistake.