How To Lose Money By Trading 101

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A beginner’s guide to losing money in trading.

Using too much leverage while trading derivatives leads to hitting the margin call straightaway if the price of the asset moves against your position even slightly.

Often the most basic risk-management strategy is ignored by traders, and trading without a Stop-Loss a.k.a not planning an exit beforehand is a time-tested way of getting liquidated.

When a trader consistently makes winning bets, they are often blindsided by the winner effect where they feel invincible and continuously increase their risk appetite. This leads to deviations from the trading plan and subsequently large losses.

Traders often believe they have taken every possibility into account when entering trades. However, Black Swan events are hard to predict rare events that no one sees coming.

Not hedging against tail-end events, traders can lose everything on a bad day.

Everybody hates to lose money and everybody hates to be wrong.

Traders often make the mistake of not realising that they have entered in a losing position just because they have entered said position. They overlook any red-flags post-purchase and commit to the bad decision.

You are now up to speed on the most fundamental things traders do to lose money. Good luck!

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