a year ago500+ Views
It is a known fact that most people get beaten by the stock market. And the ones that beat the odds? Most of them only win on pure luck. And sometimes when we least expect it luck runs out. “Statistics show that 95% of traders lose money and only 5% of traders can make a living at it or only 1% of traders make money”. The fact however is that many traders will lose money and it simply cannot be avoided. Look at it this way, if markets are truly efficient as they say then it is hard to believe that one will succeed at beating the market over and over again. Many reasons are given for this, such as bad timing, poor regulation, a poor strategy or even money management, and even if all these do play a vital role in trading success, the reasons goes deeper than that. Reasons as to why most traders will loss regardless of the method they employ includes;
The market is you and I. The reason why beating the market is almost impossible is that most traders often fail to see that the market is not independent of us, rather it is a collective movement of their own actions and others as well. The market has no external value outside of the price attributed to it by traders. The market is a great feedback loop showing traders a reading of the social mood under which traders are operating. Without a good portion of traders coming to the same decisions market would simply not move. It takes conviction by many traders to create a trend, then it takes acceptance that it is the new norm, it also takes collective disillusionment to crash.
You’re in a losing game. For example you’re paying a brokerage fee of $10 per transaction and you have $5000 to invest. To buy the stock you’re thinking of buying would cost you $10 out of your $5000, leaving you with just $4990 value of the chosen stock. Then to sell, you would have to spend another $10 out of your return. After that the stock would then have to “beat the market” by at least a little bit for you to have a return that match the market coupled with taxes because you’re going to pay taxes on all your gains and losses. And if you trade often, most gains are going to be short-term, which means higher tax rates. Obviously this becomes less likely you would successfully beat the market.
Psychology. This is another reason why beating the stock market is far-fetched, because we are wired as humans to responds instinctively to price jumps. On paper buying low and selling high looks very easy but in reality we always want to sell to avoid a falling price because no one wants to take such huge risks holding on to something that might blow up in their face.
Yes the market can be beaten but it requires a mix of good luck, great work ethics and a big bank roll to make the odds worthwhile. Unless you’re willing to essentially gamble, it’s not worth your time and effort to beat the market especially when it is so simple to match the market.
Author Bio: The stock market experts are professional traders and research house which endeavor to provide best winning trading strategies to the traders so that they stop losing money and start making consistent gains from the stock markets .