Rock star traders are made, not born. Nobody emerged from their mother’s womb and three years later started generating massive profits in the futures or forex market. It takes time – trading is a difficult pursuit and the learning curve can be steep. One might argue that, because markets are always changing, continued success requires lifelong learning.

(Note: this is the fifth in a five-part series. If you missed them, check out Part 1, Part 2, Part 3 and Part 4.)

Technology has changed many aspects of our lives; one area that has seen massive improvement is the world of investing and trading. There’s never been a better time for the individual investor to participate in financial markets. 

But it’s not all good news. The ability to trade nearly 24/7 and at speeds never seen before has a couple of disadvantages as well. Let’s discuss them here in Part 4 of our series on Not Gifting Money to the Markets. 

The greater the risk, the greater the reward – so the theory goes. Investments that involve little risk typically offer small rewards. And high-risk trades can yield windfall profits.

In trading, risks and rewards define each position. The ratio can be tweaked using tools like stop-losses and profit targets. That’s what Part 3 of our series on Not Gifting Money to the Markets is all about.

Studies show that we, as human beings, feel the sting from losses to a greater degree than the sense of gratification from winning. That means we would rather not lose than actually win. For that reason, traders sometimes make the mistake of cutting winners too soon and letting losers run. It’s a form of self-sabotage that has ruined more than one trading account.

Consistently lose money as a trader? Game over.

After all, the goal in trading is to generate profits. Like any business, it’s impossible to thrive when your account doesn’t yield positive results from one month to the next. While there are no magic formulas or rules to follow that can guarantee success, there are actionable steps that all traders can take to avoid common pitfalls.

In this five-part series, we’ll explore some of them.