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4 things first-time traders should keep in mind before trading

4 things first-time traders should keep in mind before trading

4 things first-time traders should keep in mind before trading
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By Sameet Chavan  Mar 31, 2020 6:08 PM IST (Published)

Before stepping into the trade, try and explore the market as much as you can, this is how you will know all about the available options.

Like any other skill, the art of successful trading can be learnt and made better with regular practise and constant vigilance. More often than not, amateurs expect trading to work like a flick of the wand. Of course, that only begets disappointment, eventually leading beginners to cash their chips and settle for other ways of savings yielding little returns.

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However, by following some classic rules of the game, any amateur can rise in their ranks and clock in greater profitability.
In data we trust
As beginners, the first thing to know is that trading is not a gamble. It is all about knowing the market and how it takes shape. You need to develop the basic market proficiency so that you only make wise investments. As a trader, you have to ensure that your trading calls are backed with sufficient data and proper research. You can seek guidance from full-service broking firms who have dedicated analysts for the same. Today, we are also witnessing a paradigm change with the rise of tech-driven robo-advisors. The industry-leading ones analyze over a billion data points. So, consider enrolling yourself with a robo-advisory to get going with your investments.
Know your ‘Future’ and ‘Options’
While stepping into the trade, try to explore the market as much as you can. You have to know all of the options that are available. If you think trading is all just about ‘buying’ and ‘selling’ stocks at their market prices, well, there’s more to it. More stocks can also be purchased than you can afford to through margin trading. This is what we call the derivative market. However, when it comes to derivatives, one needs to understand the pros and cons of the same before jumping into it.The associated risks get dramatically increased.
Take calculated risks and be money wise
The writing on the wall is clear – only trade what you are ready to lose. This is not to say that you’d certainly lose the money, however, you’d be better equipped to take certain necessary risks if the money is not ‘borrowed’ from any important obligation, for instance, savings for the future. At the same time, traders must not fall prey to the thrills of taking unnecessary risks – especially in day trading. Even if you have losing trades, which is true for almost every trader, you must constantly try to protect the trading capital and stay afloat in the trading business.
Be disciplined and use a stop loss
As one starts making progress and hone one’s intuition, there comes a point where the boundaries between trading to make money or just prove that one’s intuition is right, seem to be blurred. And if traders are only motivated to seek validation for their intuition through trading, it is a nosedive to the end of their careers. To the same end, using a stop loss will bring about the much-required discipline in trading. It is the trading price just below the support level (from where the stock will fall to its next support level). Should the value of a stock reach the ‘Stop Loss’ limit, all of those shares will be liquidated, thus saving you from further losses.
In the end, one must always remember that trading warrants a high level of strategy. Through the aforementioned exercises, one can continue to develop and reinvent one’s strategy. The ultimate game of a trader must be to make money while minimising losses not only when there is a strong uptrend in the market but also come up with a strategy that can be evolved to withstand the inevitable changes in the market and last for a long run.
Note: The author of this article is Sameet Chavan, Chief Analyst, Technical and Derivatives at Angel Broking Ltd.
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