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5 Reasons Why Investors Stay In Red?
One has an investment account that is in the red, and one wants to turn it into profit. Have you been in that situation before?
This article will reveal to investors the five critical reasons why most investors stay in the red.
Why Investors Are In The Red
Every investor will be in the red at one point. In most cases, it is only temporarily instead of many years. One does not want to be in the red for more than two years to the point of being forced to close positions with a large loss. Sometimes, that is the case even if one is an intelligent investor.
Being In The Red / Investing In A Wrong Sector
An investment account can be in the red for more than a year when one invests in a sector that is overbought. That is the case for many late coming investors. Not only those investors have bought into an overbought sector, they also have not diversified their investment portfolio. It can take up to four or decade before that portfolio turns profit.
Being In The Red / Trend/ Cycle/ Elliott Wave
Investors also get locked into the red when they enter the markets without minding the trends, market cycles and Elliott wave structures.
One example of wrong market timings is to buy like never before at the start of a financial market correction.
Think of the people who began to build a stake in the financial markets just when the years 2000 and 2008 corrections started. A market correction at the end of a bullish trend can keep a bullish investor in the red for at least two years. A smart investor who understands markets corrections will avoid investing during a correction.
Being In Red/ Adding To Losing Positions
Market participants also stay in the red for a long time when they are adding to losing positions.
So instead of cutting losses, one becomes bold, and begins to double down.
One example among others is the Bitcoin speculators who bought it at the wrong time, and continue to add to those positions at the wrong time. Some of those investors will be forced to close positions. Others will have to wait for four years or a decade.
Being In Red / Lone Investors
An investor can be in the red because he or she is investing like a loner who does not pay attention to other market participants. It is a big mistake to ignore other market players because they can keep you in the red for a long time.
Whenever, I come across an investor who does not care about the fundamental investors, technical traders, Elliott wave traders, Fibonacci investors, fractals traders or value investors, I am sure that he or she is a danger to himself or herself.
An investor ought to understand what other market players are doing. Do not even ignore the high frequency traders.
Being In Red / Sophisticated Investors
Investors that are not sophisticated are often in the red because they ignore the Federal Reserve, other central banks and governments.
In fact, one will never become a better investor if one does not take into consideration central banks and governments that often change the dance in the financial markets. It does not matter even if one is calling them markets manipulators.
All in all, those are the first five reasons why investors stay in the red for a long time.
Knowing the five reasons why investors stay in red will surely help one to avoid those mistakes. It does not help to keep repeating the same mistakes over and over. The time has come to improve your investment portfolio and avoid being in the red.
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