Are you someone who’s just new to the financial markets, trying out their luck or skill in making some quick money? You have read some books, watched some videos, did some research and cherry picked your intial stocks. You are all set to take positions, feeling energtic and lucky. After all, it’s a luck game, isn’t it?
It’s 9:15am, the market is open. You look at the screen as the ticker goes red and green every alternate second. The stocks which you have selected are majority in green. You confidence boosts up with slight regret as you didn’t buy them the previous day. With optimism, you buy the stock and now all you do is wait them it goes up and you make your quick money.
A few days pass by, you see there’s some profit. Now you stuck up making a decision if whether to make up the profit or wait futher for it to go higher. Somehow, you draw down on exiting the position. Kudos, you make some money. It happens with almost everyone. What is it called? Beginner’s luck.
You are riding on this new enthusiasm thinking stock markets are easy money machines! Randomly pick any stock, do some research that everyone does and put your money. Wait enough and you have your money grown. This isn’t as easy as it looks like because everytime you win, someone has to lose. Money isn’t created in thin air, someone is paying for it. Ever wondered what if you are on the loosing end?
You will, at some point, run out of your beginner’s luck. Reality will kick in. Someone whose daily bread and butter is trading wil come in, throw you out of their game and make you pay for it. Every time you’ll lose more than you plan to earn. This happens because you gamble, not plan and trade. What you fail to understand is that every profession will always take its due course to make you level up you game from a novice to an expert. This could go on for decades or till the time you properly understand how the game works.
This article is not about how to make money, it aims about how to stop losing it. If you think you don’t lose money, you might be wrong as out of every 10 people, only 1 ends up winning. Preseving what you have is more important than increasing what you have. What you can try doing is limit your money. Try doing transactions that are very low value. If you lose, you can bear it up. You still have a lot of time to improve it. Don’t try to go big, you’ll end up losing bigger.
I see a lot of enthusiasm amongst younger adults, hot guns, who go directly into futures and options.
If you are one of them, you probably don’t know how it works. Options and futures standalone are pretty easy to understand topics. Where you will go bonkers is how their value is derived because a lot of factors affect them. It’s the place where most money is gone.
You can always try to learn before jumping in or otherwise, mutual funds are the best options. I’ll be writing up next on how you could learn to pick the right mutual fund for you.
