At present, foreign exchange companies are full of false and harmful information. Irresponsible brokers can be seen on the Internet at any time to promote the use of high leverage to obtain high returns. Some "masters" claim that they can double their value year after year. Buy them quickly. The foreign exchange tutorial, the seller of trading software said that using their EA (automatic trading robot), you don't need to keep an eye on the market, you can make money while sleeping, and you can have it immediately for only $99.
These misleading advertisements and empty promises often lead inexperienced traders to increase trading risks and go astray. Trading is not a get-rich-quick route, and there are no shortcuts to trading. A foreign data study on brokers and traders found three very meaningful conclusions, hoping to inspire everyone.
First, the capital turnover rate of high-net-worth investors is relatively low
The study found that traders with more savings, more idle money, and larger money accounts traded less frequently. A reasonable explanation is that well-funded traders have no urgent need for money, and they prefer to wait for better trading opportunities. And traders with extremely limited funds, even if they make a profit, will earn less each time. In order to make up for the disadvantage of small profits, it can only trade frequently, and conduct a large number of transactions by increasing the turnover rate of funds, so that the accumulation of less can make more.
In addition, people who lack funds are often more likely to become traders because they want to make more money and escape their current financial difficulties. They may trade more, hoping to make money faster.
Beginners should realize from the above conclusions that the size of your trading account has a significant impact on your trading behavior, and traders with smaller trading accounts are more likely to overtrade. Therefore, your expected return must be reasonable, and you should not expect to make a lot of money with a small account.
Second, by studying the portfolio performance of investors who invested in lottery stocks, their returns were more than 5% worse than those of normal investors, with gamblers underperforming non-gamblers in every income group.
Lottery stocks are those that offer greater potential profit due to greater overall volatility, which means a higher potential loss. Lottery stocks are similar to lottery tickets in that they have a very low probability of high payouts in the future Rate. Previous studies have found that compared with non-lottery stocks, the average future return rate of lottery stocks is significantly lower. This is the so-called lottery stock anomaly. The usual explanation is that investors will overestimate lottery stocks to obtain high returns. Probability. Investors and traders are willing to take greater risks in order to obtain higher profits, thus exhibiting a gambling mentality.
Although investors are willing to take greater risks for greater gains, they can barely achieve their goals and end up losing more than traders who invest in more conservative and stable stocks. Other studies have shown that such traders hold losing trades longer than winning trades. Greater volatility and greater capital drawdowns at the same time are tantamount to a death sentence for a trading account; if traders are willing to accept larger losses rather than trying to maximize their profits, they are doomed Lose everything.
Lesson: If traders can't cut losing trades and effectively navigate winning trades, they shouldn't be trading volatile stocks.
Third, investors with poor financial conditions and large gaps between existing economic conditions and desired levels tend to hold riskier stocks in their portfolios.
This finding is important for understanding why many people trade in the first place, and trading is often seen by many traders as a "way out" and a way to "get rich quick". Those who want more income are willing to take more risks, although they are the kind of people who should strictly control risks. Studies have shown that these people are unable to achieve their dreams and end up losing more. Traders without a lot of capital should follow a strict trading plan and not gamble with their small capital. Unfortunately, these traders are some of the least adherent to risk and money management.
Lesson learned: Examine your trading goals. Are you making money as your only trading goal because you are not satisfied with your current situation? If money is your only goal and you want to get it quickly, then trading is not for you.
Summary: What are your trading goals?
Compare the three conclusions of this article to see if you are on the right track for trading:
1. Accounts with small funds are prone to over-trading.
2. Trading highly volatile stocks generally returns poorly
3. As the market wizard Peter Brand said, if you need money urgently, it is best not to trade, the market cannot provide a stable annuity.
Before you commit to any more trades, evaluate your goals. Why are you trading, what are you trying to achieve, do you only see trading as a possibility to make a lot of money in a short period of time? The results of the research are clear: trading with the wrong goals and mindset is doomed to lose everything .
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