Majority of the market traders loose in stock markets,so market experts keep advising to shift to stock market investing rather than trading.But it is also a fact that there are traders who make their livelihood by trading in the markets.So what is that which keeps them at advantage than the not so successful traders?
The difference is the approach,planning and discipline in your trade.You may keep buying and selling the shares,sometimes your targets getting hit and at other times your stop losses.At the end of the month you see that you made nothing out of all this hard work done.High probability is that you may have lost your capital or if you were in profit,it may be so small that you think that trading is not a business worth doing and is just wastage your time and money.
What are the rules you could follow to get out of that losing feeling and increase your success rate as a trader?Luckily these are very simple ones and you could easily follow them to make the best out of your trading.
- First of all,are you a day trader or intraday trader?If the answer is yes,you really need to re-evaluate your strategy.Even if you have decent strike rate for profitable trades,you should think to give your trade more time.If you could give more time to your trade,you’d not need to close your trade if your targets are not met and you can carry it forward.This shall also increase your profit potential as you may get bigger price move on the next day. Although risks associated with carrying forward your position to next day always remain there but advantages are also there.So by giving some time to a trade,you would be able to keep little wider stop loss,the probability of which getting triggered is lowered.Thus you avoid unnecessary commission or brokerage charges too.
- Next is how many trades you are taking in any specific time? Overtrading always erodes your profits.If you keep on entering and exiting different trades,you would end up loosing your capital and making your broker richer by paying hefty commission charges.Limit down your number of trades.Even if you loose in a trade,don’t take next trade in haste to cover up the losses of previous trade.Nothing gets covered up.Remember,you are taking another risk for that and it may also go against you.Instead of increasing number or trades,you may opt for increasing the amount you put in a trade to get more reward.
- Do you take more than one trade at a time? If you have handsome surplus cash and you plan to bet on 2-3 stocks at a time,then you should think again.By trading in more than 1 or 2 trades at any time leads to distraction of your concentration.It becomes difficult to track more stock.Moreover,sometimes if one trade turns into losses,it also leads leads to mismanagement of your other trades.Look to trade only or at the maximum two stocks at a time.Again,you can look to increase the quantity of a trade if you wish to put more money.After a favourable move,you can book out half and left the other half keep running while trailing the stop loss.
- Have you made your trading plan after thorough research? This is also important.Jumping into the market without any trading plan and technical research is like jumping in the war without any weapon and safety equipment.You would not be able to plan later after you jump into the market.Make a proper plan,write it on a paper,keep it with you and follow it strictly.If your stop loss has been pierced,you should be out of the trade without waiting for the reversal.Similarly,in case your targets have met,step out of the market without any greed and never re-enter this trade.This shall only lead to losses.
Taking these points into consideration will substantially cut your losses while maximizing the returns.Trading has the potential to yield highest return as compared to any other asset and that too in very short period of time.The need is to be serious towards your trading.You should always take your trading as a business and not as a fun.Temptation to trade excessively needs to be strictly controlled.