Everybody keeps asking how to make money, but I wanted to know how to lose it, so that learning becomes a little fun.
I’ll give you four ways to lose money.
Jumping into trades when you “feel” something is going to happen and not backing this up with practical support/resistance levels and how the stock has moved in the last few days.
Another creative way of losing money is letting your ego win. Lets say you short a stock and the stock moves up from you selling price and you are in a loss. Now you have 2 options - rethinking your trade and changing your exit plan or you can say - “How can I be wrong?”. If you let your ego win then everytime the stock moves up, you short some more quantity to improve your selling average and if the stock closes at the day’s high, then you would have lost quite a bit of cash. Oh, there is also a “God, Save me!” stage somewhere in between all this shorting.
I will include not capitalizing on an opportunity as a loss as well. People oft are scared to take trades because of the fear of losing money. So when the opportunity to be bold and take that winning trade comes up, they usually end up taking a step back and not take the trade. Now when they realize they missed their profitable trade, frustration kicks in. They usually end up taking a wrong trade and the fear has finally materialized - they end up losing money.
Now lets take a profitable trade where you eventually lose money. You are in a profit but you are greedy for more money. So you buy some more and hope for the stock to move up even higher. As you keep buying at higher levels, your buy average quietly but surely keeps moving up. Your quantity also increases. Now it will take a smaller fall for you to lose your entire profit. If there is a sell-off, you lose all your profits and maybe even go into a loss.
What makes all of these loss mechanisms work is not having a workable plan on realizing a practical profit on a daily basis and sticking to this plan no matter what.
Just buy Bank Nifty options every Thursday and this opportunity comes every week.
When 95% of people want to make money then they lose… so follow this pattern…