Social Media! Reason behind your bad Trading decisions?

Many beginner Traders join social media, especially twitter just to connect with Fellow traders.

To check!

What others are doing, Making or Losing.

We get mesmerised on day 1 by Profit Screenshots, Motivational quotes, Informative threads.

Our main purpose though is to make a huge amount of money, as quickly as possible.

And We begin our social media journey.

Though with time, It affects us in a wrong way, which was unexpected.

Here’s how-

IT MAKES YOU BREAK YOUR RULES-

Let’s take an example of a guy named Rahul.

His daily ritual is to get up and the first thing he does is to check Twitter.

And See, What his favorite Trader is forecasting about the markets, whether Nifty will go up or down.

But today, He is worried!

Because he is holding Nifty futures (Buy) at 15000 with 14800 as SL.

And his favorite Twitter trader said that the Nifty is going to fall 500 points today.

The reason for the fall Prediction is that His guru saw a Bear in his Dreams.

Rahul took the trade based upon his own analysis and he promised yesterday to himself that he will follow his trading plan and will not exit before his system doesn’t give an exit.

But, Now Rahul is getting crazier because the SGX nifty is also showing a downtick of 100 points and global markets are also down.

He is eagerly waiting for the markets to open To sell right at the opening.

The markets open only 50 points down, he is happy because he will exit from the trade with just a 50 point loss. (Note that his original SL was 14800)

That point where he exited his long position was day low, and markets kept rising for the day and ended up 200p up from his original buy point to 15200.

He didn’t re-enter fearing that the market can fall

(remembering his guru’s prediction.)

And the market keeps rallying for many days till 16000.

The trade which would have resulted in a 1000 point profit , In reality gave him a 50 point loss.

WHY?

Because he did not follow his plan and was badly influenced by the outer world (Gurus, News, global markets).

This is how social media affects your Trading decisions.

Let’s take another Real-life example-

In 2017-18 There was a boom in Graphite-electrode stocks, Many names like Graphite India, Goa carbon, and Heg Rose more than 1000%.

When they were near their top in mid-2018, they were hyped like anything, Many were giving targets of 5k For graphite India which was around 1000 at that time.

Many of my friends bought Graphite at those levels, though they knew these stocks are pumped and they can go down a lot.

They had a plan that they will exit if the stock goes down more than 20-25% from their buying levels.

But The hype was so much on Twitter that even when the stocks fell, 20-30% were looking cheap.

They bought more at those levels.

Stocks fell more, even when results came good.

They kept on holding them and stocks came tumbling down 70-80%.

 

The original plan was to exit at 20% loss, but they almost wiped their capital in these stocks.

The problem was not the stocks, the problem was not that they bought at the top.

The problem was that they did not follow their plan!

Now let’s talk about the second point –

It creates “FOMO” –

 

You are bombarded daily with Profit and loss screenshots, 1000% Return stories, etc.

They are good to get inspired but Most Traders will try to imitate the performance and might blow up their accounts.

If you are comparing your performance with others, you are going in the wrong direction.

There’s a lot of money to be made in Trading, BUT!

Only if you FOCUS on YOURSELF.

The most recent example of how Social media creates FOMO is BITCOIN.

Everyone is talking about it, open Twitter, Instagram, or youtube.

You will find everyone is busy Making huge sums of money.

And you seem left out, Even though you don’t even know what it is and how it works and 2 months back you were saying it’s just going to crash.

But now you try to find ways to get into bitcoin, and finally, you bought bitcoin at 60k $.

Thinking that it will go to the moon.

And it crashes from 60k $ to 30k $ in a few days, and you sold at the bottom in panic.

Remember that you weren’t originally interested in buying it, but how social media platforms give you a feeling that you are the only person who hasn’t made 100 X returns.

The point is not if Bitcoin will go to the moon or not.

The point is That you are not taking Trading decisions based on any analysis, study and More importantly “without any plan”.

Now, you know that How social media affects you as a Trader, what can you do about it?

Don’t use it during market hours.

When you are holding a position, It might be best if you isolate yourself from others’ advice, otherwise, you will again end up Breaking your rules.

Learn from others, but Take trades only based upon your understanding.

You can’t just keep on taking trades on the basis of others, you have to take your own trades, even if they go wrong, otherwise, how will you improve.

Know that most social media influencers are just showing the BEST of their lives-

See, No one will admit it, but hey who wants to post their Failures out there in public,

So, know that everyone is just presenting the best of what they got and you don’t know what is going behind the scenes.

Know Your purpose of Using social media-

There could be different objectives to use social media, Learning, Sharing what you know, Selling products and services, Growing audiences and few guys also have a TROLLING business 🙂

So, whatever you need from it, it will give you, if you need knowledge it will provide you knowledge, if you need profit screenshots it will provide you profit screenshots.

So choose wisely.

So, that’s it for today from my side folks.

Thanks for reading.

Written By:-

Trader knight