Many traders in the global and local stock exchanges think that this process is like gambling, in that it will either lead them to be rich or they will lose all their money. In reality the case is not like that at all. Trading in stock markets is a science and an art that needs knowledge, practice and consistency.
Unfortunately many traders lose a lot of money in stock markets because of lack of knowledge about many aspects of trading, the money that was obtained from selling a house or a valuable asset. Some of these traders didn’t spend some time to learn some basic tools of trading because they were in a hurry to enter the market because they think that the opportunity will finish and it won’t come again. This is off course not true because in sophisticated stock markets the opportunity is always there.
There is an unofficial study that was published in Wall Street 5 years ago showed that 90% of new traders lost their capital by their first year of trading and half of the rest 10% lost it by the end of year two. Then by the third year another 3% moved out from the market and only 2% stayed there after 3 years. There may be some exaggeration in this statistic but the real numbers may be very close.
Another study showed that 80% of traders are suffering from continues losses because of there little knowledge about the basics of trading and stock analysis, and 10% are making profits because of luck only. The last 10% consist of 8% of losers because of bad money and risk management practices and 2% that are very successful in stock trading.
The important knowledge that is needed by traders consists of three parts. Part one is known as the fundamental analysis that focuses on the analysis of financial statements, projects that the company is performing, the industry that the company is doing business in, and the analysis of the economic status of the country(s) the company work in.
Part two is known as the technical analysis. This analysis is solely based on the analysis of the stock charts and it is related to the demand and supply of the company’s stock.
The third part is the money and risk management part that is the most important part and most traders have very little information about it. Lack of information about money and risk management is very obvious among small traders who usually suffer the most in cases of significant market movements.
Studying trading is very important to all traders in stock markets, and the most important part of it is the tools and practices of money and risk management that will maximize the profits and minimize the losses if performed well.
* Think Interactive * 