Per March 2020 reports, due to coronavirus-driven mass self-off, Warren Buffet’s Berkshire Hathaway suffered a loss of about $70 billion. Warren Buffet and his company aren’t alone. The entire market is bleeding.
From the time COVID-19 became an evident threat to the world, on the back of the market’s volatility, many stock traders have lost big money. They are still losing big. What’s worst, even in the post-pandemic world – when the global economy bottoms out – many of these stock traders will continue losing money.
Of course, unsurprisingly, a part of their losses owes to the lags and reluctance towards the fundamental rules of the game. For instance, portfolio diversification is a key strategy for stock traders to minimize risks. However, few really take it as something important. Similarly, having a well-defined system and risk management are other things that a trader needs to have and yet many don’t.
But there are many other reasons…
Besides the common and fundamental mistakes, there are many other interesting reasons why so many stock traders are currently losing money – and why they will continue losing money in the post-coronavirus world.
Lack of Discipline
Ask any successful stock trader and they would tell how big of a role discipline played in their rise.
Many stock traders undermine the significance of this feature… And these are also those who fail to build high-worth portfolios.
Profitable stock trading is a lot about discipline… discipline to track the market everyday religiously… discipline to continuously learn from different sources… discipline to read charts, consume relevant news… discipline to regularly adjust your system and make trades.
Without discipline, you will end up over-trading and in the grip of FUD. You will fail to learn and grow. You will fail at building a high-worth portfolio.
Sadly, so many young stock traders lack the adequate discipline to act thoughtfully, which leads them to losses. This is a big – but often overlooked – reason why many of them are losing money at present. And when the economic condition will go worse, they will struggle even more.
Too much focus on short-term rewards
At first glance, stock trading might not look like a game that requires a long-term outlook. After all, you buy stocks at a low price and sell them at a higher price; the profit in between, you take it home.
In reality, however, smart stock trading isn’t necessarily about making quick money but rather building a high-worth and sustainable portfolio.
Unfortunately, many stock traders get this wrong.
They instead focus on short-term chases and rewards. Their short-sighted approach prevents them from optimally tapping on trends. It paves them to risky trades. They end up failing at making the most of market opportunities.
A lot of stock traders who have lost big money during this pandemic are the ones who work without long-term goals. They work to make more money in a week and not build a high-return portfolio in a couple of years.
This is the same reason, in fact, why even at present many traders – already with losses – are trying to time the market and ineffectively buy the dip.
Insufficient proficiency in technical analysis
Just knowing what triple Bollinger bands strategy is isn’t sufficient. You must know how to tap on such advanced concepts to make profitable trades.
What many market players do not realize is that theories will take them only so far.
Reading how to trade in stocks is much different from actually doing it.
Similarly, reading about technical analysis is much different than actually implement the concepts in real-time.
Many stock traders lack adequate knowledge around technical analysis. And it’s a big flaw in times like today when the market is highly volatile, there’s FUD everywhere, and individual traders must make decisions based on their own needs, intuitions, and unique understanding. You can’t do that if you aren’t fully aware of and adept in areas like momentum investing, flag pattern, short selling, moving averages, Fibonacci retracement, Elliot wave theory, and more.
Having in-depth knowledge of technical analysis is key to sail through challenging times like the one we’re going through.
As the world stares at one of the biggest recessions in decades, stock traders who are technically conversant will have a relatively smoother ride. Sadly, there aren’t many of them. The rest must immediately seek to upscale their skills through appropriate stock market courses.
It Requires a Wholesome Approach
So, it isn’t just about how stock traders are messing with the basics and ending with losses. There are many other interesting reasons why many of them are in the state that they are in now. Meaning, there isn’t – and couldn’t be – a single checklist or course of action for them that they can follow and get on the right track. A lot of ends need to be fixed. The stock traders in question who have ended with big losses due to this pandemic, they must take a wholesome approach wherein they invest to improve self as a trader from every end. It includes everything FROM learning about, say, triple Bollinger bands strategy and amplifying their technical knowledge TO networking with other traders and taking better care of self-health. Interestingly, with how things look now – how the global economic contraction is going to cause so much damage in the coming months – stock traders have no other option but to suit up and stay prepared. Unless they are fine losing money, they must take definite and wholesome steps to grow themselves from every end.