7 reasons why intraday traders lose money in the stock markets (2024)

FAQs

7 reasons why intraday traders lose money in the stock markets? ›

Lack of trading discipline

This is the primary reason for intraday trading losses in the intraday trading app. Trading discipline has to focus on three things. Firstly, there must be a trading book to guide your daily trading. Secondly, you must always trade with a stop loss only.

Lack of trading discipline

This is the primary reason for intraday trading losses in the intraday trading app. Trading discipline has to focus on three things. Firstly, there must be a trading book to guide your daily trading. Secondly, you must always trade with a stop loss only.

Trading is a skill that requires education, practice, and experience. Most traders fail because they do not invest enough time and effort in learning about the markets and trading strategies. They enter the market without a proper plan or strategy, which leads them to make poor decisions and lose money.

The emotional aspect of trading often leads to irrational decisions like panic selling. When the market moves unfavourably, many traders, especially those who are inexperienced, tend to panic and exit their positions hastily. This panic selling often occurs at the worst possible time, leading to significant losses.

It is a high-stakes game where many are lured by the promise of quick riches but ultimately face harsh realities. One of the harsh realities of trading is the “Rule of 90,” which suggests that 90% of new traders lose 90% of their starting capital within 90 days of their first trade.

In Intraday, the price movements in a single day can make investors doubt their initial decision. In this case, all you need to do is decide the entry and exit price before taking a position. This ensures that you have an objective view and know the levels at which you will be buying or selling your trades.

A common practice is to set the stop-loss level between 1% to 3% below the purchase price. For example, if you buy a stock at Rs. 300 per share, a 2% stop loss would be triggered at Rs. 294, helping you limit potential losses while accommodating normal market fluctuations.

Another reason why day traders tend to lose money is that it's very different from long-term investing. While traders take advantage of price swings (which means they have to make specific predictions), investors tend to buy a diversified basket of assets for the long haul.

In summary, if you want to make a living from day trading, your odds are probably around 4% with adequate capital and investing multiple hours every day honing your method over six months or more (once you have a method to even work on).

How to make consistent profit in intraday trading? ›

One of the accepted techniques of intraday trading is to buy on rumours and sell on news. If you find the rumour about bad results from a company quite strong, you can sell the stock intraday with a stop loss, ahead of results. When the actual results are announced, use the lower levels to exit.

The defining feature of day trading is that traders do not hold positions overnight; instead, they seek to profit from short-term price movements occurring during the trading session.It can be considered one of the most profitable trading methods available to investors.

The 3–5–7 rule in trading is a risk management principle that suggests allocating a certain percentage of your trading capital to different trades based on their risk levels. Here's how it typically works: 3% Rule: This suggests risking no more than 3% of your trading capital on any single trade.

The numbers five, three, and one stand for: Five currency pairs to learn and trade. Three strategies to become an expert on and use with your trades. One time to trade, the same time every day.

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade.

One of the best intraday strategies to adopt is always to close all your open positions, i.e. complete your transactions. Often, when the stocks fail to give the set target price, traders tend to opt for delivery of the shares. The transaction takes place on the next day, hoping to reach the target then.

Momentum oscillators are considered one of the best indicators for intraday trading. At times traders can miss out on price movements during short-period cycles. This is when momentum oscillators can be helpful.

Day trading does not help one get rich overnight. Many of the traders start intraday trading with an assumption that they can generate good money by making profits with just a single trade. But this is practically not possible and is not real as well. Experienced traders will attest to this.

How can I do intraday without losing? ›

You should always set stop losses to help mitigate risk in your intraday trading strategy. If the stock price reaches your set stop-loss price, the position will be exited immediately. This action helps prevent significant losses from a sudden move in the wrong direction.

However, it has been recently discovered that the majority of option traders lose money in the market. In my opinion, this is due to the neglect of some crucial aspects of options trading. Know Your Enemy in Options Trading becomes very essential. The majority of errors and losses arise out of that.

It's often hard to accept the kind of uncertainty in the market. Traders can be reckless. They may forego market analysis, dodge setting Stop Loss orders, and the risk management rules. All of this leads to mistakes and bad trades.

Stock selection: Stock selection is crucial for making profits in intraday trading. Choose quality stocks to trade. You may want to exit the position as soon as you incur loss and think twice before investing in the same stock, as such investment may increase risk.