Stock market is a good opportunity for many of us to earn money. However, there are a lot of hidden risks as well. Here are some of the reasons why you may lose money:
- You persistently hold onto losing stocks: It is a common rule in stock market that you need to cut your losses. If you wait too long, you are digging a hole that’s already too deep and you can’t climb out. If a stock already loses nearly 50 percent of its value, there’s a good possibility that it won’t recover its value in near future. If you already lose money and you can’t see a possibility that it will go up again, then you should avoid losing more. You should be realistic and consider whether the stock will ever go back to its original value. Don’t sit and wait, only to see that the stock drops lower than before.
- You try to predict everything: Predicting and anticipating everything are difficult things to do. A stock can be predicted to rise in value, depending on internal and external factors. However, unexpected things could happen. You should learn about expert predictions and see whether they are accurate. Take into account what factors they include when predicting the fluctuation of stock values. New stock traders shouldn’t make their own predictions, because they could end up losing money easily. Uninformed opinions are dangerous and you should know that market is always right, regardless of how insensible it behaves. There are always random factors that are at play in the market. Patience is virtue, you need to observe and learn a lot.
- You don’t know when to sell: You could have very accurate predictions, but they don’t mean anything, if you don’t have the best timing. You will not profit if you don’t know when to sell. You could lose money easily if you are late in selling your stocks. Again, you need to observe and learn before taking part in the stock market. It takes practice to know when is the best time to sell and take steady profit, no matter how small it is. If you sell too late, you may lose a significant proportion of your potential profit. Discuss with experienced traders and observe how they behave in the market. If experienced traders start to sell their stocks, you should observe and see the results. You will see that most of the time they get steady profit or at least, they can minimize losses.
- You continue to buy when price is dropping: Traders may think that the stock will regain its original value again and they continue to buy, regardless of the downturn trend. This may seem like a sound strategy, but it’s also very risky. You should know that there’s a reason or two why a stock drops in value. If the stock is backed by the good performance of the company, price drops are usually slight and fluctuating normally. However, if the company has shaky foundation, there’s a good chance that the value will drop permanently. Everyone says that you should buy low and sell high, but stock market is complex. When you buy something low, its value may depreciate further and never go up again.