While every new stock trader wants to make it big, success only comes to those with a solid trading strategy. If you are new to stock markets, these are five tips that can help you succeed.
While you might have read several stock market success stories, most of the people do not really focus on the flipside. For every trader who made it big in the stock market, there are hundreds and thousands of traders who didn’t. While there is no denying the fact that the stock market indeed has unlimited earning potential, success only comes to those who have a solid working strategy in place.
If you are new to the stock market, these are some tips that can help-
- Be Ready to Invest Time in Learning
Going through a couple of articles and opening a demat account is not really the correct way to begin. We spend almost 18 years on formal education to get a decent job. How can reading a few articles help you succeed in something as challenging as stock markets?
Don’t just rely on random blogs and focus on actually educating yourself. Read popular books, try to understand the underlying concepts of trading, know the reasons why people lose money, etc. to begin your trading journey on a positive note.
- Know what Type of Trader you Want to Be
Traders are generally divided into two categories- intraday traders or day traders and long-term investors. It is very important for you to first understand what kind of trader you want to be. An intraday trader might buy something when the market starts and then sell it an hour later. They might even hold their position for a few days or even weeks.
Long-term investors, on the other hand, hold their positions for months and years. The trading mentality of both the investors is very different. While an intraday trader is betting on the short-term movement of a stock, a long-term investor is focused on the bigger picture.
- Know your Risk Appetite
Your risk appetite is a genetics-based psychological trait which is positively influenced by your income, wealth, and education but negatively affected by factors like age. Every trader has a different risk appetite, and there is no way to find the right balance.
For instance, can you risk Rs. 10,000 to get Rs. 50,000 or Rs. 50,000 to get Rs. 50,000? Your risk appetite has a major effect on the decisions you take when trading. Know how much risk you can take and create a psychological limit around it to be a better trader.
- Do not Follow the Herd
The herd mentality would only make you a poor trader. Advice and tips from others would make you incompetent to trade on your own. While it is good to take advice from seasoned traders, do not invest in a stock just because your friend or a relative is investing.
When you trade on your own, you get to learn a lot of things which you cannot learn when you simply follow the herd. Even in cases when you lose money, you’ll at least learn something from the whole experience. It is such experiences that make trader a successful trader.
- Do not Invest all your Savings
Most of the people searching for how to trade in the stock market are salaried professionals looking for an additional way to earn some extra income. But it is not wise to invest all your savings in the stock market. Fix an amount from your salary that you’d like to invest.
Most importantly, never invest the money that you need or borrow money for trading. While you might earn some good profits with such high level of risk, you are sure to find yourself in a big mess at some point in future.
Stock trading is not as difficult as people believe but not as simple as something you can begin just after reading a few articles. Remember the tips discussed above, and it can surely be your success story that might inspire hundreds and thousands of people in future.