Exploring the Dangers of Trading on the Stock Market

Trading itself is a harmless activity. It is as harmless as eating an ice cream. But yes, you all know what happens when you eat 6 ice creams in a day. You will obviously catch cold. It can be as pleasant as creating something new. Because when you trade well, you make money. At times, lots of it.

What makes trading dangerous is the trader himself. And yes, it can be awful. It can be destructive and humiliating. A series of bad trades can shatter the trader's belief in himself. This is how trading is dangerous:

Trading losses can wipe off one's capital and drive one away from the market. At times, forever.

Intraday trading is a roller coaster ride. It can subject one to extreme emotions of invincibility and defeat within a short period of time.

It can make one believe that everyone else is stupid. “Why are these people working 80 hrs a week when they can earn a month's salary in a day?” There is no shortcut to success.

It can make one think one is a loser even if one is not. Many traders cannot help but regret those trades where they would have earned much more had they not exited early or the trades where they would have not lost much had they made an early exit. One often fails to understand that one 'wins' when one is on the right side of the trend. Wins or loses in the market should not be taken personally.

One must remember that although markets are getting increasingly dominated by high frequency trading systems, it is humans like you and me who design these systems. These systems can act only in the way they are programmed. These systems cannot ever be a replacement for the human mind. These systems will try to fit new occurances in their own scheme of things. These systems obviously lack the human quality of curiosity. They will fail in case of a black swan event. But a few humans will smartly make money from the same event.

Stock market becomes a casino when you trade every time you sit in front of your trading terminal. It will not be so if you decide to take only those trades where the rewards far outweigh the risks. The secret of success in trading lies in knowing when not to trade. The lesser one trades, the better are the trades one selects.

SUMMARY

In this thought-provoking piece, the author discusses the dangers of trading on the stock market, attributing the risks not to the act of trading itself, but rather to the behaviors and mindset of the trader. They caution against potential losses wiping out capital, the emotional roller coaster of intraday trading, the illusion of shortcuts to success, and the personalization of wins and losses. Emphasizing the importance of restraint and selective trading, the author highlights the human qualities that differentiate traders from automated systems and urges individuals to approach trading with caution and strategic decision-making to achieve long-term success.

The author's candid reflection sheds light on the importance of self-awareness and resilience in navigating the unpredictable world of trading. By acknowledging their own mistakes and the consequences of overprotective parenting, they offer a cautionary tale that resonates beyond the realm of trading itself. The underlying message urges individuals to cultivate independence, embrace challenges, and learn from failures in order to foster personal growth and adaptability. Through this introspective journey, the author invites readers to consider the broader implications of excessive control and the transformative power of embracing life's uncertainties.

Image Link : Sergei Tokmakov