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  • Writer's pictureMatt DeLong

Why is stock trading not easy?

A few reasons why it’s not simple:

  1. RANDOMNESS: There is a certain randomness to the intraday movement of stocks. Every single “stock education” guru out there thinks they can explain every single tick of a stock and once you learn it you can drive a Porsche/Lamborghini like they do — let’s all be honest, there is randomness that cannot be anticipated.

  2. LACK OF RISK MANAGEMENT: bad or no “risk management” causes you to lose large chunks of capital very quickly, so now your trading account is at $ZERO, now what do you do genius? You told all your buddies about your one great trade where you made $20k one week and turned around and lost it all and them some the next week.

  3. WHICH DIRECTION? No one knows the direction of the market in advance — not traders, not market makers — not Jim Cramer — not even billionaires, NO ONE. You see billionaires make $100m+ per year in the stock market not realizing that they could have easily lost the same dollar amount if the winds had changed directions! Even billionaires get it wrong, see this article on Bill Ackman losing $4 billion on $VRX in 2 years, the stock fell 96% from it’s previous high!! Limited Partners (LP’s) pulled even more money out of his hedge fund — which shrank by almost half during that time. Link> Billionaire Bill Ackman Sells Disastrous Valeant Investment After Nearly $4 Billion Loss

  4. NOT ADMITTING YOU ARE WRONG: $4b loss — yes the ego of a billionaire is very expensive to maintain. Ask Bill Ackman (link above) & George Soros after the surprise Trump election. Link> Soros lost nearly $1B in post-election market rally: report

  5. OUTSIDE FORCES: It’s not as simple as clicking BUY / SELL buttons — otherwise we’d all be billionaires tomorrow. There are a lot of market forces, sector rotations, good/bad earnings, good/bad press that comes out of left field, analyst buy/sell ratings and other randomness that affect your overall gains/losses.

  6. EMOTIONAL & PSYCHOLOGICAL: The unspoken stress of emotional & psychological pressures start to stack up after a string of losses in a row. Do you really know what you are doing? Did you just get lucky a few times? Are you sure you are cut out for this? You abandon your well thought out strategy & plan and start “chasing” every stock that is moving adding to your losing streak. You yell at your wife, who yells at your daughter — who then kicks the dog.

  7. 95% FAILURE RATE: But the Stock Market has the allure of instant wealth reserved for only the naïve. I made it through the gauntlet, you can too.

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