What is the correct mindset to trade in the Stock Markets?
Posted On June 27, 2018
Trading is often said to be a risky proposition. There is a lot of uncertainty and confusion among people who have just started trading with regards to whether they would be successful or not and also with regard to the process and methodology they need to follow for their trading activity. Let’s see some key pointers to trade in the following article.
Well, there will be ups and downs. No one has ever beaten the market every single time. If your accuracy is 55%, i.e. you make money on 55 of the 100 trades you place, there is nothing better than that itself. So, always have in mind that most people don’t win more than 55% of the times, and the difference between the number of winning and losing trades contains the profits.
A trading mindset requires patience and a disciplined approach. You would definitely feel happy when you are making money, your orders are in profit. And feel sad the otherwise. The biggest mistake most people do is that they always believe they will make the profit every single time. And in the process, they don’t sell their losses when they needed to do, thereby only increasing the losses. And when people are in a profit, people don’t book their profits as well? Why? Because they think the price will still go up and their profits will increase. 80% of the times, this leads to reduced profits and increased losses.
Traders have to accept the fact that there will be profits and there will be losses. The only thing they have to ensure is that their profits are greater than the losses.
Before placing any trades, always have a well-defined reason and question yourself, why should I buy at X price, what should be the target and stop-loss. Always always have a valid reason for every action you do in the stock markets. If you are buying a stock, maybe your formula’s say’s so, maybe a big news has come in, or can be any other reason, but the reason has to be rational.
Once you have placed a trade, always have a target and stop-loss set for that. You should be knowing when do you plan to exit that position before placing an order.
Every trade has a story of its own that you create. Every trade has its start, its ups and downs and finally an ending. The start is the time when you buy, ups and downs are the movements that happen and ending is the target or stop-loss of the trade. Be sure to create a beautiful story with a well defined and rational start and logic end targets.
How much money should I trade with?
Trading is a bit risky prospect. The golden rule is that trade with the money you can afford to lose.
Obviously, you won’t be losing all of the money, the stock price will never be zero. But yet, as a rule of thumb, and to be always the safer side, trade with the money you can afford to lose.
There are people who have made money in the stock markets and there are people who have lost.
As a conclusion and our own experience, there have been days when our automated algorithms themselves have made a profit of 2.5% in a day without leverage and there have been days when the picture was not so rosy.
Patience and disciplined approach is the key.