Today I want to touch on a topic regarding investors. For individual investors to achieve stable and long-term profits in the market, it is essential to have a solid trading strategy, and not simply follow the trend without criteria. Otherwise, only the blind spots will increase, and when losses occur, it is common to increase the position or not execute the stop-loss. In reality, this often happens due to a lack of technical ability in analysis.
I have identified the 5 main reasons why individual investors suffer losses. I suggest you review them and see if you find yourself in any of these situations.
Reasons why individual investors fail in their investments:
Lack of knowledge
Many investors enter the market impulsively, without having real knowledge about it. They do not even understand the operating rules and much less know basic technical analysis. Even if they are taught some concepts, they do not know how to apply them. They do not understand trend analysis, and they cannot even read a candlestick chart. Moreover, some cannot even handle spot trading and are already getting into contract trading...
Lack of information
Individual investors often rely too much on news, making impulsive trades without being able to distinguish whether short-term news is positive or negative. This results in blind trust.
A clear example was when Bitcoin surpassed $100,000 last year. Without any confirmation, a research report showing an optimistic market outlook was used by institutions to create a frenzy of speculation. Many people were misled by this rumor, bought at high prices, and in the end, institutions sold their assets, leaving individual investors trapped at inflated prices. The number of people who suffered liquidations was enormous.
Due to a lack of knowledge about the market, individual investors often do not know how to choose good projects. When they lack this ability, they try to enter the market and end up consulting close people or following various courses that only confuse their thinking. This leads to an incorrect assessment of gains and losses. I want to emphasize an important point: learning should not be interrupted halfway. Joining too many investment groups or following self-proclaimed 'experts' will only confuse your investment approach.
Related to buying and selling
The loss of the opportunity to trade is one of the common causes of losses. Many times, investors choose good assets, but due to a judgment error, they fail to time their buying or selling correctly, which ultimately results in losses. This is related to the stop-loss problem. Often, when gains are within reach, greed leads investors to give up those gains to institutions. Developing the habit of setting an appropriate stop-loss is an essential condition that every successful investor must have.
No matter how good a coin is, it will always have both bullish and bearish trends. It is extremely rare to be able to buy at the lowest point. With the popularity of short-term trading, almost all investors allocate part of their funds to short-term trading strategies. However, as the price of the cryptocurrency fluctuates downwards, many maintain an optimistic attitude, hoping the market will recover. Nevertheless, the market continues to fall relentlessly, and over time, this short-term strategy turns into a long-term strategy. As time passes, this can deteriorate the emotional state of the investor, gradually weakening their judgment capacity.
Blindly investing in multiple projects
Do not spread yourself too thin in your investments. Analyzing the assets you invest in takes a lot of time and judgment; a small oversight can lead you to make mistakes.
Diversifying without proper analysis is one of the most misguided strategies. Only by reducing the assets you invest in can you decrease risk. For example, investing in stocks just because you see they are generating profits, participating in short-term government bonds upon noticing their rise, buying cryptocurrencies when you see they have growth potential, or getting involved in CFD trading without proper analysis will leave you with no time to conduct a thorough analysis and reflect adequately. Especially in the case of stocks, just because you hold them long-term does not mean it is value investing, nor does it mean value investing will always be profitable. A good company is not always synonymous with a good stock. Giving up current great opportunities in cryptocurrencies due to uncertainty about future stock returns is a demonstration of immaturity. The method to balance an account is the approach, not diversification. I know this statement may generate disagreement among many, but I want to say that the principle of putting all your eggs in several baskets only applies if you first have a clear understanding of whether those 'containers' are indeed baskets. This concept is not something that gets resolved in three to five years, especially for those who are not that familiar with the market.
Exactly, the mindset of individual investors is that as long as they do not take profits, they believe that the tokens they are losing on will eventually rise.
Therefore, they tend to hold on to those tokens hoping for a rebound, not realizing that they have already lost many opportunities to profit.
Unstable judgments
Investment should not be based on unbreakable principles. Even if there are some, they do not remain, but change according to the mood of the moment.
When you think the price is going to rise and suddenly it drops, your original idea that the price would go up is affected, changing back and forth, which leads to recurring losses. In trading, an investor can have multiple moods at different times, which happens precisely because basic knowledge is not solid and the mindset is easily influenced by market fluctuations.
