Few tips before you start in stock market or do trading are as follows:
- Your own capital: Never take a loan or borrow money from a friend to trade in stock market. Many times I have seen that people borrowed money or took loan from someone on high interest rates and then lost capital and they caught in trouble.
- Sufficient Capital: I have seen many people who make loss just because they don’t have sufficient capital to survive in market like many people trade 5 lots for Intraday in 1 lac capital. I don’t recommend this because sometimes you may get profit but it’s purely a gambling to trade like this. Always put sufficient capital to trade as per NSE margin guidelines and also maintain MTM so that you don’t have to book losses.
- Following a Stop loss: New comers don’t follow stop loss and they just keep on holding a losing stock and it ruin your whole capital. Don’t do that. Always cut the loosing position before it wipes out everything.
- Hold Profit with a trailing Stop loss: Many times I have seen that people book 2 rs profit and hold in 20 rs loss. You should always hold profitable stocks with trailing stop loss to maximize your gains and minimize your losses whenever you are in loss. In this way you can gain good profit from market.
- Be cautious on other’s advice: Many people buy or sell anything because a friend, an adviser or anyone suggested. It may give sometimes profit but it’s riskier too because you can’t earn consistently by just following TV advisers or any friend. So always do your own research before trading or investing. Because learning by you is a key to earning.
- Be cautious when everyone is buying or selling: we have seen many times that if everyone is saying that this stock will reach 200–250 level, it doesn’t happen and that stock gives opposite movement. You should follow warren Buffet’s golden lines that be fearful when others are greedy and be greedy when others are fearful.
- Over Trading: Many people trades too much in a day and they hold too many stocks at a time which is a indication of a disaster. Some are too curious to trade that they put trade at 9:15 AM only and that trade gives losses too many times. One should always wait for perfect opportunity to earn in market because less trading saves profit while frequent trading takes away saved profits.
- Following an advisory company: This is the most common problem nowadays and I was a victim too before I joined tradepsychology.com There are thousands of unregistered and registered advisory companies and tips providers in India. Follow only reputed advisers or follow anyone after doing proper research about them because it’s your hard earned money after all. You will get so many Facebook tips providers and WhatsApp tips providers but don’t believe them until you know everything about them. Because it’s very easy to make fool people through Social media by posting wrong information.
- Learn Basic technical: Always try to learn basics of stock movement so that at least you can get idea about stock’s support and resistances. Always Buy on support and sell on resistances with stop loss.
- Don’t Average: Many people buy a stock for an example at 190 and then average at 188 and may be again at 185 and then they have to cut all positions at 180 because of insufficient margin. Don’t average in market because adding loosing positions is always riskier. Better just give up and find other opportunity.
- Risk Appetite: Always follow risk percentage of your capital. Suppose if you have 1 lac capital, don’t take more than 10% of risk in single stock because if you lose 10%, it can be covered but if you lose more, than it create a problem. So always follow risk management formula to minimize your risks.
- Don’t be emotional in trading: Many people follow any particular stock or index like it’s their favorite and their friend. Don’t love any stock or index. Just follow basics and trade. Sometimes loving a stock gives us big losses.
- Stop Trading: Stop trading whenever you are losing frequently because it happens sometimes that you’re all decisions and thoughts are against of market which are giving you losses. So whenever this kind of situations are happening, just stop trading and take a break.
- It’s not primary source of Income: Many people think that this is their primary sources of income and they leave their work or job. I just advise them that never leave your primary source of income because stock market earnings are external source of income and keep it as extra income only. Never make it as a main source because it may harm you and your family. Don’t be emotional and sentimental in stock market because market doesn’t understand anyone’s emotions or problems. Don’t expect that market gives you money for any operation, any loan payment or any other sympathy earning. Just be practical and trade.
These are tips for trading and basic rules which will help beginner to start his trading journey without much hurdles.