FOREMOST
Three major decisions to be taken while entering the stock market
- Do you want to trade or invest?
o The rules are absolutely different in both the themes.
- What is my risk reward ratio?
o Earning rewards should be more than possible losses.
- Are you timing the market well?
o Timing is what all is required at the Stock Market. Masses are running after the choice of scrips which actually does not matter much.
MOST FORBIDDEN PERCEPTIONS PREVAILING AT THE BACK OF TRADERS’ MIND
· "I want to be a millionaire today" or "I want to recover my loss today only".
o If thought judiciously,a very small amount per day, yields massive returns at the end of the month.
· "I have a Bad Luck"
o Luck can never work ifthe strategies are incorrect. Like, wrong medicine can never heal.
· "Aur kitna girega Bazaar….Buy more...Dekhi jayegi."
o Then...whatever is seen is not desirable.
An Observation: People most successful in all fields of their lives; commit maximum mistakes at Stock Market. 'Their confidence is true but the field is new'. Therefore, successful people need to be careful of tripping, by thislogic.
RULES FOR TRADING
ü NEVER trade against the tide. Just swim a bit with the flow/direction of the Market and come out with clean profits or minimal losses.
ü Do not be obstinate (ziddi) with the Markets. Those are much more powerful.
ü Obey the Stop Loss as staunchly as your religion. It deceives some times but is an Ultimate Savior. If the Stop Losses execute very frequently, then there is a fault in your strategies, Correct those.
ü The stop loss should be very near to the trade so that our heart accepts the loss easily when triggered. The longer the gap, more difficult would it be to book loss (Psychological).
ü Have patience in profits and run away at first step of loss. Trailing stop loss can be used to maximize the profit.
ü Very few people make losses because of wrong strategies. The major culprit is absolute in-disciplined approach. Discipline is defined as:
o Trade quantities should always be uniform.
o Chances of profit should be higher than chances of losses in every bout.
o Amount of Profit/Loss should be pre-calculated, thought-over and then enacted.
o Trades without stop loss bids (Put in the system) are suicidal.
o Excitement with the market movements should be well controlled.
ü There is very little room for fundamentals (of Stock) while adopting the trading approach. Only picking the momentum is required.
ü The scrip chosen should be liquid enough.
ü A normal human brain is intelligent enough to catch the momentum by just observing. No need to hunt for any tips, it makes you dependent…….Believe it.
ü While doing positional trading……Take it as a thumb rule – Never carry your position when in deep loss and always carry it over when in deep profit. You are bound to get better favoring prices, the next day.
ü The best form of trading approach is Intra-Day which can be judged by any means. It leaves you fresh for 18 hrs. of the day to decide the trend neutrally, next morning.
ü Golden opportunities never give much time to act. Remember, Tops and bottoms are made just for an instance. So, act fast.
RULES FOR INVESTING
These investing rules are formed with a symptom based approach so that it is easiest for a layman to take decisions based on common logics. Following are few such symptoms:
ü Long term investors only need their Broker once or twice a year at the most. You can judge and decide whether you are/you wish to be an investor or a trader.
ü Start Investing in Good quality stocks when there are no noises about Stock Markets and Stocks are the least favorite gossips in parties. Also, when everybody is saying that stocks are the last thing to have in life. It’s the right time. Then sleep over your stocks for at least two years and wait for a boom time.
ü Boom time is best signified when you hear a rickshaw puller talking about stocks. Sell majority of your stocks and wait for another recession with cash invested in fixed return instruments.