How dangerous is trading on the stock market?
Eight years ago, I decided to try my hand at trading. Accordingly, I believe I can respond to your query.
Trading is innocuous in and of itself. It's completely safe, just like eating ice cream. But you know what happens if you have 6 ice creams in one day. Naturally, you will become ill with a cold. It can be just as satisfying as making something from scratch. Simply said, if you trade well, you'll increase your wealth. Sometimes a great deal of it.
The riskiest part of trading is the trader themselves. Yes, it really can be that bad. It's damaging and embarrassing at times. In trading, confidence can be severely damaged by a string of losing trades. Here's why trading might be risky:
1. Losses in trading can quickly deplete a trader's funds and discourage further participation in the market. The length of time can seem endless at times.
2. Trading on the intraday market is a wild ride. In a short amount of time, it may make you feel both invincible and defeated.
3. It can lead one to assume that everyone else in the world is dim. "Why are these folks putting in 80 hour weeks when they can make a month's worth of money in a single day?" Achieving success quickly is impossible.
4. This might lead a person to feel like a failure when in fact they are successful. Many investors dwell on past trades from which they could have reaped greater rewards or avoided greater trades if they had only stayed the course. It's easy to lose sight of the fact that being on the right side of a trend means you came out on top. There should be no emotion attached to market success or failure.
It's important to keep in mind that although high-frequency trading algorithms are becoming more and more prevalent in the market, they are still designed by people like you and me. These systems are limited to their predetermined responses. These computer programs will never be able to take the place of a human brain. As new events occur, these systems will attempt to accommodate them within their preexisting framework. Clearly, these machines don't have the curious nature of humans. If a "black swan" happens, they'll be doomed to failure. However, some savvy humans will profit from the same development.
When you trade every time you sit down in front of your trading terminal, the stock market feels like a casino. If you only make trades when the potential gains outweigh the potential losses, that won't be the case. Knowing when not to trade is a key component of successful trading. The fewer trades a person makes, the better quality trades they will make.
Despite what I've written above, I'm still figuring out how to become a successful trader.
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