Why do I keep losing money in trading? – 3 steps to prevent it !

man with laptop on desk terrified by stock market chart
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You are probably losing money because you do not follow your own rules or you do not have the proper knowledge. Either way, you are losing money, which is never good for your pocket.

Is it possible to not lose money in trading??

NOPE. NEVER !!

That is the harsh reality of trading.

Even the most consistently profitable trader will lose.

So, from my experience, I can tell you that losing is not a negative thing in the stock market, so stop worrying and

BE PREPARED TO LOSE !

I know it doesn’t sound appealing to beginners. But my point is for you to understand that it is perfectly normal to lose trades and to not be carried away by emotions after a loss, which will in turn give you more losses.

Do you do this ?

Now, it doesn’t mean that you CAN have losses. Our primary goal is to minimize losses and maximize profits.

This is achieved by simply following a rule which is to

FOLLOW THE RISK-REWARD RATIO !

Simply put, the risk-reward ratio is just the measure of how much you are willing to lose in order to reach your target profit.

This simple concept along with the STRATEGY WIN-RATE will make sure that you stay profitable at the end of the month.

Make sure that you follow this rule EVERY TIME.

A much simpler and safer risk-reward ratio of 1:1.5 and win-rate of above 50% would be very profitable in the long run.

Now, you say that you follow your risk reward ratio and win rate but you are still losing trades. What does it mean?

Strategy matters too !

Sometimes, the strategy sucks. There are so many strategies out there on youtube and websites, believe me, nothing is effective unless you understand how it works and why it works!

Any strategy contains a stock selection method, entry criteria, stop loss rule, and take profit rule.

And the criteria are based on the use of indicators or price action or both.

I have used almost everything and I can say for sure that price action works the best, when used along with a few indicators.

In price action, simple market structure concepts like trends, support and resistance, and pullbacks work wonders.

And indicators like ATR and moving averages really help understand our price action faster.

Now, everything is in place, but you still lose… You wonder why?

Then the final piece of the puzzle would be

Trading psychology

If you have a good strategy with a win rate of 50% or above and your risk-reward ratio is 1:1.5+ , then the only cause for your loss would be your trading psychology.

Trading psychology just means that you will have to have a proper mindset before you trade and be able to manage your emotions while trading.

This is more important to avoid losses because your emotions can make you take trades which you will never do if you are in your right mindset.

Mistakes like

Overtrading,

Wrong entries,

Wrong stock selection,

Adjusting the stop losses,

Booking profits early etc.

This is because the main big emotions like fear and greed are involved and it is very difficult to overlook these emotions.

So, being emotional is totally understandable. Just once in a while is ok. But make sure you are not being careless about the impact of your emotions on a trade.

The best way to overcome this problem is by using a trading journal and understanding the root cause of your emotion.

You can read about each of the topics in my blog to get a detailed understanding of the topics.

These are mainly the most common causes of losses for any level of trader.

So, make sure you have all these rules followed, and you will reduce the number of losses.

And always keep in mind that becoming consistently profitable is our goal. We don’t have to be profitable every time.

Feel free to comment and ask any kind of doubts related to trading and I will be happy to share with you, my experience and lessons learnt along the way.

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Ramya Vaidyanathan

Self-made independent trader who primarily trades stocks, forex, and cryptocurrency! Specialized in M.Sc. Biotechnology & M.B.A. Loves to learn and share everything that can make people's lives easier. Life hacks are the focus of Art of Hacks, a brand website. This website, in particular, focuses on financial hacks such as trading, digital entrepreneurship, and saving hacks. Feel free to comment, share and subscribe to your preferred category! To learn more about trading and my trading journey, subscribe to my YouTube channel Female Trader Ramya!

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