Swing trading is a popular investment method that involves holding positions for several days to a few weeks, with the goal of capturing the short-term trend. However, as with any type of investing, there is always the risk of losing money. In this blog post, we will discuss some key risk management strategies that swing traders can use to protect their capital.
Use stop-loss orders: A stop-loss order is a type of order that automatically closes a position at a specified price, thereby limiting potential losses. For example, if you buy a stock at Rs 50 and set a stop-loss order at Rs 45, your position will be closed automatically if the stock price drops to Rs 45. This can help you avoid large losses if the stock price suddenly drops.
Diversify your portfolio: Diversification is the most important risk management strategy that you can use. It means spreading your investment across different assets, sectors, and markets. This can help reduce the overall risk of your portfolio, as a loss in one position may be offset by gains in another. Even when it comes to swing trading, diversification can help you protect your capital.
Keep an eye on your risk-reward ratio: The risk-reward ratio is the ratio of the potential loss to the potential gain of a trade. A good risk-reward ratio is generally considered to be at least 1:2, meaning that for every Rs 5 you stand to lose, you stand to gain Rs 10. This means that you should not take on trades that have a higher risk than reward.
Use proper position sizing: Position sizing is the process of determining the number of shares to trade based on your capital and risk tolerance. It is important to only invest a small percentage of your capital in any one trade, as this can help you limit your potential losses. Position sizing is the king of ensuring that you do not lose more than you can afford.
Keep a trading journal: Maintaining a trading journal can help you track your trades, identify patterns, and evaluate your performance. This can help you make more informed decisions and improve your risk management strategies over time.
In conclusion, swing trading can be a profitable investment strategy, but it is important to manage risk effectively to protect your capital. By using stop-loss orders, diversifying your portfolio, keeping an eye on your risk-reward ratio, using proper position sizing, and keeping a trading journal, you can minimize your potential losses and maximize your chances of success.
Swing trading is a popular investment strategy that involves holding a stock or other security for a short period of time, usually a few days to a few weeks, in the hopes of profiting from short-term price movements. And like most types of trading, swing trading also comes with its own set of mistakes that are avoidable. In this blog post, we will discuss seven common mistakes that swing traders make, and how to avoid them.
Not having a well-defined trading plan One of the most common mistakes that swing traders make is not having a well-defined trading plan. A good trading plan should include your entry, risk management and target booking. Without a clear plan, it can be easy to make impulsive decisions or to deviate from your strategy. To avoid this mistake, be sure to develop a detailed trading plan before entering any trade.
Not using stop-loss orders Stop-loss orders are an important risk management tool that helps traders limit their potential losses. However, many swing traders fail to use stop-loss orders, which can lead to large losses. To avoid this mistake, be sure to use stop-loss orders to protect your capital. In extremely volatile markets, please understand that your positions might give good profits and losses with overnight news and movements.
Over-trading Over-trading is another common mistake that swing traders make. This occurs when a trader enters too many trades in a short period of time. Not only is this risky, but it can also lead to missed opportunities. To avoid over-trading, be sure to limit your position size and avoid taking on too many positions at once. And close your trading terminal as soon as your profit or loss limit is reached.
Not diversifying Diversification is an important strategy for managing risk. However, many swing traders fail to diversify their portfolio, which can lead to large losses if a particular stock or market performs poorly. To avoid this mistake, be sure to diversify your portfolio by investing in a variety of stocks and other securities.
Ignoring the news Another common mistake that swing traders make is ignoring the news. Economic news, such as interest rate decisions and GDP reports, can have a big impact on the markets. Additionally, company-specific news, such as earnings reports and management changes, can also affect the price of a stock. To avoid this mistake, be sure to keep an eye on the news and stay informed about the latest developments.
Being overly optimistic or pessimistic Swing traders should avoid being overly optimistic or pessimistic about the market. This can lead to impulsive decisions and missed opportunities. To avoid this mistake, try to maintain a neutral outlook and let the market tell you what to do.
Not being patient Finally, swing traders should be patient and avoid impulsive decisions. This means waiting for the best entry and exit points, and not acting on emotions or impulses. By staying patient and disciplined, you can increase your chances of success as a swing trader.
In conclusion, swing trading can be a great way to make money, but it also comes with its own set of challenges and risks. By being aware of these common mistakes and taking steps to avoid them, you can increase your chances of success and become a more profitable swing trader. Remember, a well-defined plan, risk management, diversification, keeping an eye on the news, being neutral, and being patient are key to success in swing trading.
In theory, a trading edge is a strategy, observation, or special technique that gives a trader an edge over other traders in the market and helps them make more money. There are a lot of books and papers on different trading techniques, but since many people learn and use the same information, the chances that it will give a trader an edge quickly go down to almost nothing.
Finding an edge and understanding what that really means can help you decide if it’s worth your time to look for one or if it’s even possible or useful.
The Common Thought
Most people think that an edge is something that a trader knows or uses that gives them an advantage over the market or all the other traders. For example, a trader might think that using a certain indicator (like the Relative Strength Index, or RSI), in a certain way (like making short trades when the RSI is above 84), gives them an advantage over traders who don’t use the same indicator in the same way.
Many new traders spend years trying out different indicators or different settings for indicators (like a length of 10, then a length of 15, etc.). They also try out different chart settings, like time-based charts, tick-based charts, or volume-based charts, to find the combination that gives them an edge.
Getting Your Way
Some traders have never heard of the term “edge.” When they do, they might start to wonder if they have an edge or if they need to find one. A few rules can help traders find trading edges, if there are any:
The edge must be based in reality and can’t be based on assumptions. A trader needs to know that an edge might not work all the time. It is possible to make a lot of money with an edge, but then the edge might stop working for a while.
If you think you have an edge, you should test it by clearly defining the rules and then applying them to historical market data and “paper trading.”
A wake-up call
In reality, there are traders who think they have an advantage and traders who think they need an advantage. Some traders laugh every time someone talks about an edge while they make another trade that makes them money. In other words, you might find and use an advantage or you might not.
Many traders think that good training and instruction give them an edge. In fact, this could be the edge that people looking for an edge are looking for. To trade well, you don’t have to compete with the market or other traders. In fact, the opposite is true. Good risk management and a healthy dose of patience are more likely to lead to success in trading. Retail traders often do better when they focus on controlling their own decision-making processes instead of making decisions based on things they can’t change.
This is not what many new traders will say. If you are one of them, think about this: Traders who think they have an edge will never tell other traders what trade they are about to make. These traders think that if they talk about it, they might lose their edge.
Professional traders, on the other hand, won’t think twice about telling other traders what trade they are about to make. This is because it doesn’t change the potential of the trade if other traders know about it or make the same trade.
Prices can change over time based on supply, demand, and investor sentiment as a whole, but just because one investor thinks they have an edge won’t change anything.
If you are a new trader who is just starting to look for your edge or if you are an experienced trader who has been looking for your edge for years, you should stop. Markets change so quickly that an edge you find today is likely to be useless tomorrow. In the short term, looking for a trading edge might help you make quick money, but it’s more likely to waste your time and cause you to miss out on opportunities and money.
There are many ways to become a professional trader, and a person needs a lot of skills to do well in a field with a lot of stress and competition. When financial firms hire people for trading jobs, they usually look for people with degrees in math, engineering, and hard sciences instead of just people with backgrounds in finance.
There are also different kinds of trading jobs, some of which require communication skills with customers as well as knowledge of charts. So, let’s take a look at some of the skills that all traders need.
Skill at analysing
Every trader needs to be able to look at data quickly and figure out what it means. Trading involves a lot of math, but charts with indicators and patterns from technical analysis show what the data means. So, traders need to improve their analytical skills so they can see trends in the charts.
Research
Traders need to have a healthy thirst for information and a desire to find all the important data that affects the securities they trade. Many traders make schedules of economic reports and news that affects the financial markets in a way that can be measured. By keeping up with these sources of information, traders can act on new information while the market is still processing it.
Focus
Focus is a skill, and the more traders use it, the better they get at it. Because there is so much financial information out there, traders need to be able to focus on the important, actionable information that will affect their trades.
Sector-based traders also focus on one particular industry. This helps them learn more about a certain sector, industry, or currency, which gives them an edge over traders who don’t specialise as much.
Control
Control and, more specifically, self-control go hand in hand with being able to focus. A trader needs to be able to keep their feelings in check and stick to a plan and strategy for trading. This is especially important when using stop losses or profits at set points to manage risk.
Many trading strategies are made so that the trader loses less when things go wrong and makes more money when things go right. Strategy goes out the window when traders start to get emotional about their trades, whether they are good or bad.
Keeping a record
Keeping good records is one of the most important parts of trading. If a trader keeps careful records of how his or her trades turn out, all that’s left to do to get better is to try out different strategies and change them until one works. If you don’t keep good records, it’s hard to show real progress.
On their way to becoming market masters, stock traders go through different stages. One of the hardest things to learn is how to trade without letting your emotions get in the way. You can be good at picking stocks and managing risk and still fail as a trader if you can’t keep your emotions in check.
When you know how to control your emotions, you can be patient with your winners and not at all with your losers. Even though it seems easy to say that you should stick to your trading plan, it is actually much harder to do so. Most of us have strong feelings about money, which makes it hard to stick to our rules.
To do this, you have to take the money out of the picture. Financial risk can’t be a factor in making decisions. It might be hard to incorporate this ideology while trading but you can remove the emotions from trading only if you are able to get this right.
Here are some ways to trade without letting your emotions get in the way:
1. Don’t put yourself in more risk than you can handle.
Most traders keep their losers too long and sell their winners too soon because they take on too much risk. Taking on too much risk ties down your risk management, making it harder for you to make trades with a positive expected value.
This is something you can change by taking less risk. Then, many traders find that the upside isn’t enough to make them want to trade at all. If a trader doesn’t have a way to make good profits with the money they have, they may start to take on more risk to try to get better results.
But you can make your trades more likely to go up without taking on more risk if you scale into your positions. As the trade goes in your favour, add to your winners. You don’t need to put yourself in danger by doing this. You can lower the risk of your other positions by using the money you made from your first positions. Add to the list of winners. Don’t throw money at your losers.
2. Change how you think about money
We often tell people that it’s best not to look at the summary of their trades’ profits and losses. When you do this, you get too caught up in the current gain or loss on your positions, which makes your fear or greed about the trade worse. Instead of making decisions based on the chart, think about the money.
People can’t be expected to trade without checking to see if they are making or losing money. So, if you have to look at your trades, instead of focusing on how much money you are making or losing right now, think about how much money you will make or lose if your trade hits the stop loss levels.
If you buy 1,000 shares of a stock for Rs 100 and the stop is at Rs 90, you could lose Rs 10,000. That’s how much you could lose when you leave.
Let’s say that this stock goes up to Rs 120 and you move your stop to Rs 110. Even though your position is up Rs 20,000 right now, if you get out on the stop, you will only make Rs 10,000. You need to pay attention to the number that matches your exit point. Don’t think too much about where you are now.
If you congratulate yourself on making Rs 20,000 on a trade, you start to feel something about that number. If so, you are less likely to sell the stock if it goes back down to Rs 110, where you would only make Rs 10,000. You thought you would make Rs 20,000 and hoped it would be more. It hurts to leave at a lower price, so many people stay and wait for things to turn around. Count on what you already have, not what you want.
3. Make a plan on paper and trade it
Some people can lose their minds because of how they feel about a trade. When you make a trade, your feelings can make you break your trading rules. Having a plan written down will help you stay on track when you get lost.
The plan doesn’t need to be long or hard to understand. A trading plan shouldn’t be longer than one page, in our opinion. It should include your rules for entry, risk management, scaling, and leaving the business. There should also be a review process so that you can work to make your rules and how they are carried out better.
When you write down an idea, it gives it more value. Before you make another trade, take the time to write out a plan.
Day trading is a way to trade stocks that is both risky and profitable. Day trading, which is also called intraday trading, is when you buy and sell stocks during the same trading session. Here are some basic intraday trading tips you can use if you want to use this strategy to make money on the stock market.
Before we get into the rules, the basic rule of trading is to use the right tools — as a share trading company we understand this better than anyone and are here to offer our customers the best Indian trading platform along with the lowest brokerage options.
1. Choose the best stocks
When you start day trading, the first and most important thing you should do is choose the right stock to buy. Not all stocks are good choices for trading during the day. Since you would be buying and selling them during the same trading session, you would need to choose stocks with a lot of liquidity, which will make buying and selling them easier. Large-cap stocks and mid-cap stocks are usually the best choices for day trading because they have a lot of buyers and sellers.
2. Set prices to enter and exit the market
Once you’ve decided on the stock you want to trade, the next step is to set entry and exit prices. Going into a trade without any goals is a sure way to lose money. Set a price at which you want to buy the stock and stick to it, even if it means you might not be able to buy it. Set a goal for when you want to sell the stock, even if it means you might miss out on any gains the stock might make in the future.
3. Don’t forget to set stop loss After buying the stock, the first thing you should do is set a stop loss. This will keep you from losing a lot of money if the stock moves in a way you didn’t expect. Let’s say you buy a stock for Rs. 100 with the hope that it will go up. But as a safety net, you set a stop loss at Rs. 97. Now, if the stock goes against your expectations and drops to Rs. 97, the stop loss will be triggered, and your stock will be sold at a loss of Rs. 3. You will also be protected if the price goes down even more.
4. Always follow the trend
This is one of the best tips you can use when trading during the day. If the market is going up, it’s a good idea to buy stocks. And if it is bad, it is best to sell stocks. Contrarian views on the market are never a good idea because they can backfire. For example, many people short-sell stocks when the market is bullish because they expect the price to go down. These kinds of changes don’t happen very often.
Conclusion
Even though intraday trading is riskier than regular trading, when done right, it can be one of the most profitable ways to make money consistently. So, if you want to do day trading, you must have both a trading account and a Demat account. Get in touch with us right away to start trading stocks.
As a share trading company, we understand this better than anyone and are here to offer our customers the best Indian trading platform along with the lowest brokerage options. Want to try out our tools? Get in touch with us.
For many investors, the stock market today opens up a world of chances. But if you don’t know how to handle the ups and downs of the markets, it can be a dangerous place. To trade well in any financial market, investors need a set of skills. The skill set should ideally include the ability to evaluate the basic technical aspects of any company and to figure out the direction of a stock’s trend. But neither of these skills is as important as the way a trader or investor thinks.
Sometimes it seems like stocks have their own minds, but investors need to keep their emotions in check, think on their feet, and trade with discipline and care. This is where “trading psychology” comes into play. Your state of mind has a lot to do with how you make decisions and act on the trading floor.
When you, as an investor, are in the stock market today, you need to keep your feelings in check. If you understand these, you’ll be able to trade well and reach your goals. Two of the most important emotions you need to control are greed and fear. Greed is driven by the desire to make more money, and fear is driven by the worry that you might make the wrong choices. If you can keep these two bad feelings in check, you will not only win the mental battle with the stock market but also the war.
Getting things done quickly
When you have to do different things in the stock market, you should know what emotions are involved so you can control them. Traders and investors need to be able to think quickly so they can act quickly. It takes a clear head to be able to jump into and out of stocks at the last minute. Investors also need the discipline to stick to their plans for trading and investing. They should know exactly when to start making money and when to stop losing money. In reality, emotions get in the way of these actions when they get in the way.
What’s the deal with fear?
When you’re an investor or trader on the stock market in real-time, it’s hard to keep your feelings out of it. If you want to be successful at trading and investing, you should be able to keep your emotions, which are the only thing that drives sentiment, under control. Often, while trading is going on, bad news about a certain stock will come out. You might even hear that the economy as a whole is in bad shape. This is when investors become fearful. This could cause you to sell your stocks, which would force you to sit on your cash and keep you from taking more risks. As a result, you may avoid losses but may lose out on gainful returns.
When investors and traders see a threat that may or may not happen, they often act quickly out of fear. Here, you might act without thinking when you think there is a threat to your chance of making money. If you want to trade and invest, you should know that situations like this can happen. So, you can prepare yourself mentally.
Keeping greed under control
There is a saying that suggests that greedy investors on Wall Street usually end up losing money. This is about investors who are too greedy and tend to hold on to a winning position for too long. These investors want to take advantage of a stock’s winning streak until the price goes up one more time. What they don’t expect is that the stock will take a sudden turn for the worse and fall in a flash.
Greed is hard to get rid of, and most investors don’t start out greedy but tend to become greedy as they go. Greed comes about because people want to do better. But trading should not be based on whims and impulses; it should be based on facts.
Rules are the best
Several experienced investors will tell you that it’s easy to make rules, but it takes a lot of mental strength to follow them. When people act on impulse instead of following the rules, they tend to break them. Investors may or may not make money on the stock market today, but when it comes down to it, they must stick to their rules. Right from the beginning, you need to set some rules. These must be based on your risk/reward tolerance and tell you when to enter trades and when to get out of them. A stop-loss should be put in place after a profit goal has been set. All of this takes the feelings out of trading and investing.
Reason and research help people win wars
Traders can get through a day of trading with ease if they use logic and reason. Also, investors and traders can choose which events will make them decide to sell or buy stocks. You should also decide how much money you are willing to lose or win in a day. If you have reached your profit goal, it makes sense to stop trading right away.
All of this is, of course, governed by rules, and the most important thing is to follow the rules and be reasonable. Trading and investing in stocks is not scary, and you can do it by opening a demat account with Zebu. When you do research on a stock, you can also learn about the stock’s trend. In the end, it’s up to you if you want to use the stock market as a battleground or a place to play.
At Zebu, as one of the top brokers in share market we offer the best online trading platform to make your trading journey smooth.
When it comes to investing, stock trading gives more weight to short-term profits than long-term ones. It can be dangerous to jump in without knowing what to do.
How do you trade stocks?
When you trade stocks, you buy and sell shares of companies to make money off of daily price changes. Traders keep a close eye on these stocks’ short-term price changes and then try to buy low and sell high. Traditional stock market investors tend to be in it for the long term, while stock traders focus on the short term.
If you trade individual stocks at the right time, you can make quick money, but you also risk losing a lot of money. The fortunes of a single company can rise faster than the market as a whole, but they can also fall just as quickly.
If you have the money and want to learn how to trade, you can trade stocks quickly from your computer or phone thanks to online brokerages.
Ways to trade stocks
There are two main ways to trade stocks: When an investor makes 10 or more trades per month, this is called “active trading.” Most of the time, they use a strategy that depends heavily on timing the market. They try to make money in the coming weeks or months by taking advantage of short-term events (at the company level or based on market fluctuations) like results, RBI policies and global economic events.
Day trading is the strategy used by investors who buy, sell, and close their positions in the same stock all on the same trading day. They don’t care much about how the businesses they’re investing in work. The goal of a day trader is to make some money in the next few minutes, hours, or days by taking advantage of price changes that happen every day.
How to buy and sell stock If you’re new to trading stocks, you should know that most investors do best by keeping things simple and putting their money in a mix of low-cost index funds. This is the key to long-term outperformance.
So, if you want to trade stocks, you need to do five things:
1. Get a trading account
To trade stocks, you need to put money into a brokerage account, which is a special kind of account made for holding investments. You can open an account with Zebu in just a few minutes if you don’t already have one. But don’t worry, just because you open an account, you’re not investing your money yet. It just lets you know that you can do it when you’re ready.
2. Set a stock trading budget
Even if you’re good at trading stocks, putting more than 10% of your portfolio in a single stock can make your savings too vulnerable to changes.
If you want to start investing, you could start by putting away Rs 2,000 a month. When you have Rs 2,000, you could put Rs 500 into an investment. Think of the Rs 500 you don’t invest as a parachute. It might not be necessary, but it’s there just in case. Other things to do and not to do are:
Trade with the money that you can afford to lose.
Don’t spend money that you need to use soon for things like a down payment or school.
Cut that 10 percent if you don’t have a good emergency fund and aren’t putting 10 to 15 percent of your income into a retirement account.
.3. Figure out how to use market orders and stop orders
Once you have a brokerage account with Zebu and a budget, you can use the website or trading platform to buy and sell stocks. You’ll be given a number of order types to choose from, which will decide how your trade goes. In our guide on how to buy stocks, we explain these in more detail, but here are the two most common types:
Market order: The stock is bought or sold as soon as possible at the best price.
Limit order: Buys or sells the stock only at a price you set or higher. For a buy order, the limit price is the most you’re willing to pay, and the order will only go through if the stock’s price falls to or below that amount.
4. Use a “paper trading account” to get some practice
Try investing in the market without putting any money in it yet to see how it works.
Choose a stock and keep an eye on it for three to six months to see how it does. You can also learn about the market with the help of tools like online paper trading. Customers can test their trading skills and build a track record with stock market simulators before putting real money on the line.
5. Use a good benchmark to measure your returns
This is important advice for all investors, not just those who are very active. When picking stocks, the main goal is to beat a benchmark index. That could be the Nifty 50 index, which is often used as a stand-in for “the market,” the Sensex, or other smaller indexes made up of companies based on size, industry, and location.
Measuring results is very important, and if a serious investor can’t beat the benchmark, which is hard for even professional investors to do, it makes financial sense to invest in a low-cost index mutual fund or ETF, which is basically a basket of stocks whose performance is close to that of one of the benchmark indexes.
And these are the basic dos and don’ts for beginner traders. Stay tuned for more on this subject.
When you trade options, you can make money even if stocks go up, down, or stay the same. With options trading, you can cut losses and protect gains for only a small amount of money.
Great, right? Here’s the deal: When you trade options, you can lose more money than you invest in a short amount of time. This isn’t the same as when you buy a stock. You can only lose what you paid for the stock in that case. With options, depending on the type of trade, it’s possible to lose all of your money.
That’s why it’s so important to be careful. Even if you’re an expert trader, you can still make a mistake and lose money.
When it comes to online stock trading and growing your trading account, another important aspect for you to consider is the share market brokers you trust. At Zebu, we offer the best trading platform that is packed with features that will help you make better trading decisions.
To help you avoid making costly mistakes, we’re going over the top 10 mistakes that new option traders make.
1. Buying OTM call options
Buying out-of-the-money (OTM) call options is the biggest mistake you can make when trading options. OTM call options seem like a good place to start for new options traders because they are cheap. This may feel safe to you because it’s the same thing you do as an equity trader: buy low and try to sell high. There are many ways to make money in options trading, but they are one of the most difficult. In this case, you might lose more money than you make if you only use this method.
The smarter way to trade
Think about selling an OTM call option on a stock that you already own as your first move. In the business world, this strategy is called a “covered call.”
The risk doesn’t come when you sell an option when you have a stock position that covers the option. In addition, if you’re willing to sell your stock if the price goes up, it could make you money. This strategy can help you get a sense of how OTM options contract prices change as the expiration date nears and the stock price changes.
It’s also possible to lose a lot of money by owning the stock, but that risk can be big. Even though selling the call option doesn’t put your money at risk, it does limit your chances of making money, which is called “opportunity risk.” You could have to sell the stock if the market rises and your call is taken.
2. Not Knowing How Leverage Works
Most people who start trading don’t think about how much risk they’re taking when they use the leverage factor in option contracts. They like to buy short-term calls. As a result of this happening so often, it’s worth asking: Is buying calls outright a risky or safe strategy?
3. The smarter way to trade
A general rule for new option traders: If you usually trade 100 share lots, stick with one option at first and start with that. If you usually trade 300 shares at a time, then maybe three contracts would be a good change of pace. This is a good amount to start out with. If you don’t do well with these sizes, you’ll probably not do well with bigger size trades, too. This is a general rule.
4. Not having an exit plan
You may have heard it before: When you trade options, like stocks, it’s important to keep your emotions in check. The point isn’t to be able to overcome all of your fears in a superhuman way.
Having an exit plan even when things are going your way is part of this. Take the time to figure out where you want to leave and when you want to leave.
If you start to worry about leaving some money on the table by getting out too early, don’t worry. Remember this counterargument: What if you made more money consistently, cut down on your losses, and slept better at night?
5. The smarter way to trade
Make sure you know how you’ll leave a trade. Whether you are buying or selling options, having an exit plan can help you set up better trading habits and keep your fears in check.
Determine how you want to get out of the situation on the upside and how much you can handle on the other side. In the event that you reach your upside goals, you should clear your position and take your money. Don’t be too greedy. If you hit your stop-loss on the downside, you should clear your position again and start a new one. Don’t stay in a losing trade hoping that the prices may rise again.
A lot of times, it’ll be hard not to go against this way of thinking. Don’t. Too many traders make a plan and then, as soon as they make a trade, ditch their plan and follow their feelings instead.
Online stock trading requires you to stick to your plan and use the right market brokers to grow your trading account. At Zebu, we offer the best trading platform that is packed with features that will help you make better trading decisions. If you would like to know more, please get in touch with us now.
When you are new to trading and are Googling what it takes to be a successful trader, you’ll quickly become familiar with terms like “plan your trade; trade your plan” and “minimise your losses.”
And the amount of information available can soon overwhelm you. So, here is a simple, 10-step Gyan about what you should do in the first year of trading.
Each of the guidelines below is vital, but their combined impact is powerful. Remembering these can considerably boost your chances of market success. But before we get into the article, make sure to always choose an online trading platform that offers either lowest brokerage or zero brokerage intraday trading.
Never trade without a plan.
A trading plan details a trader’s entrance, exit, and money management criteria for each buy. With today’s technology, it is easy to test a trading strategy before risking actual money. Backtesting allows you to test your trade concept using past data to see if it works. Once a plan is devised and backtested well, it can be employed in real trading. Your job is to simply keep to the strategy. Trading outside the trading plan, even if profitable, is considered a bad strategy.
Trading As A Business
Trading should be treated as a full-time or part-time business, not a pastime or profession. As a hobby, there is no genuine commitment to learning. A job without a regular income might be frustrating. Trading is a business with costs, losses, taxes, stress, and risk. As a trader, you are a tiny business owner who must research and plan to optimise your profits.
Embrace Technology
Trading is a cutthroat sport. It’s safe to presume that the most successful traders use all available technology. Traders can use charting software to view and analyse markets in limitless ways. Using a good and trusted online trading platform with the lowest brokerage or zero brokerage for intraday trading is another important strategy. Backtesting an idea with historical data saves money. We can track trading from anywhere with our smartphones. A high-speed internet connection, for example, can considerably improve trading performance. Technology and keeping up with new products may be exciting and lucrative in trade.
Preserve your trading capital. Saving money for a trading account requires time and effort. It’s considerably harder when you have to do it again. Notably, safeguarding your trading capital does not imply never losing a trade. Every trader loses. Protecting capital means not taking needless risks and protecting your trading enterprise.
Become a Student Of The Market
Consider your career in trading as lifelong learning. Traders must keep learning every day. Remember that learning about markets and their nuances is a lifetime endeavour. Studying hard helps traders grasp economic information and help them develop an edge over the others. The ability to focus and observe allows traders to refine their skills. Politics, news, economics, and even the weather affect the markets. The market is fluid. Traders are better prepared for the future if they understand the past and current markets.
Don’t Trade More Than You Can Afford to Lose
First, be sure that all of the funds in your trading account are genuinely expendable. If it isn’t, you should save. Money in a trading account should not be used to pay for college or the mortgage. It is dangerous to use the money for trading that is earmarked for critical expenses. Money loss is bad enough. It’s even worse if it’s capital that should never have been risked.
Develop a Fact-Based Methodology
Developing a strong trading strategy takes time. It’s easy to fall for the online trading scams that promise trading strategies “so easy it’s like printing money.” Facts, not emotions or hope, should guide the creation of a trading strategy. In general, traders who are not in a hurry to learn can sort through the internet’s vast amount of data more easily. Suppose you wanted to change careers, but you needed to spend a year or two in college to be qualified to apply for a job in the new field. Learning to trade takes at least the same amount of effort and research.
Use a Stop Loss
As a trader, you set your own stop loss. The stop loss might be in rupees or percentages, but it restricts the trader’s risk. Using a stop-loss reduces tension when trading since we know we will only lose a certain amount. Even if a trade is profitable, not having a stop loss is undesirable. The trading plan’s guidelines allow for lost trades to be exited with a stop loss. The aim is to profit from every trade, but that is unrealistic. Using a precautionary stop-loss reduces losses.
Know When to Sell
Inefficient trading plans and ineffective traders are the worst combinations for a trading career. If you feel like your trading strategy is not responding well over a period of time, then take the time out to re-assess and develop your strategy again. An unsuccessful trading plan is an issue that has to be solved. It is not the end of a trading career.
An ineffective trader is one who sets a trading plan but is unable to follow it. External stress, bad habits, and inactivity all contribute to this issue. Traders who are not in top trading condition may consider resting. After resolving any issues, the trader can resume operations.
Remain Focused on Trading
Trade with a big picture in mind. It’s normal to lose trades; it’s part of trading. A winning deal is only one step towards a successful business. And the cumulative profits matter.
A trader’s performance improves once they accept wins and losses as part of the business. That is not to imply we cannot be happy about a successful deal, but we must also be aware of the possibility of a loss. Setting realistic goals is important for a trading career. Your company should make a reasonable profit in a reasonable time. Expecting to be a multi-millionaire by Tuesday is a recipe for disaster.
Conclusion
Understanding the value of each trading rule and how they interact can help a trader build a profitable trading firm. Traders who follow these criteria with discipline and patience might boost their chances of success in a highly competitive market.
