1) Your trading/investing experience > Answers - I made a huge loss since I logged-in
2) The number of years you have been investing or trading in the markets. > Answers - 3 yrs.
3) Your area of interest - > Answers - till now I only trade in cash, which is not listed here. By the way what is secondary market?
4) How do you make your trading decisions. > Answers - This is the challenging area for me or other as well. thats why I came to this site, but cant find any useful info yet.
5) How you discovered this forum. > Answers - Google - Any doubt or other assumption you have?
6) ETC, etc.
Hi
Sorry to hear about your loss.
There are many things which affect decision making process of a trader. As a trader one has to concentrate on various aspects such as...
- Trade management
- Money management
- Trading Psychology
You need to work on a few things to succeed in trading...
Trading Style
First of all you have to decide that what type of trader you want to be. 1) Investor or 2) Trader. If your answer is 1, then you can do it with methods using fundamentals and technical analysis. If your answer is 2, then two more options. What type of trader do you want to be...
1. Intraday trader
2. Positional Trader
I would not recommend intraday trading to someone who is just starting and does not have much idea or experience about the market. In this case Positional trading would be better option.
So is positional trading easier than intraday trading. No, not at all. But it makes the process of entries and exits much slower and gives you more time to make your decisions. Less trades and more time for learning.
Trade Management
Once you have decided what method to follow and which market to follow. Next thing is to decide your entry and exit rules. There are various methods. People use from tape to charts to astrology. Best things would be charts. Rember charts will not tell you where the stock will surely go. But it will help you to decide your entry in the direction of a trend at the best possible level with best risk reward ratio.
- How to learn entries/exits on chart?
There are various methods. Some use price, some use various indicators. I personally use only price. Learn how to find support/resistance on a chart. See how a price reacts to that level in favor of trend and against trend. Suppose if you are using daily chart for trading, look at daily trend, them zoom in the chart by going to hourly, find support resistance in hourly TF. Look at reaction and find an entry with an exit plan.
Remeber dont try to trade against trend while you are learning.
*hourly/daily is just example, you can use any time frame. But higher the time frame, slower the trading process.
Once you are in a trade, you always have to keep trailing your stop loss to protect your capital. You can keep two types of stop loss for a position...
This SL is decided by your analysis of charts. Remember never ever lower your SL against your position under any circumstances.
This depends on the maximum risk you want to take on a trade. Suppose your capital is 100000 and risk per trade is 1000. Then you exit position at the point when it reaches capital based trade. Whether it touches system based trades or not. This will protect you when there are gaps beyond your system based levels.
Dont confuse capital based SL with System based SL. Capital based SL could be wider. It is kind of contingency plan if situation goes out of control. Capital based trades must not hit very often. If it does then you need to work on your method.
Money Management
SL is a part of money management too. But as I have already talked about it, I will not discuss it further. But SL is not only thing in money management. You have to work on your account too. If your account is going down and you keep trading you will be doomed. If you are doing good and keep trading without plan you will not be able to take advantage of amount you have earned.
Keep target levels and SL levels for account. Increase you position size when it reaches a certain level and and decrease if hit lower target or account SL..
E.G. suppose your account size is 100000. you are trading xyz stock. Your qty is 100. your target should be aprox 125000 (it depends on you, this is just example). So if your account hits target you increase qty to 125. If you are not doing good and it goes down. Hits 75000, reduce qty to 75.
This is just my view many traders follow different methods of MM.
Trading Psychology
You will be able to make best trading decisions if trading does not give you any stress. There are various reason for a person to be in stress.
- Insufficient Capital
- Trading without plan
- Losses that you might have made in trading
- Responsibilities
- Family problems
- Demonetisation
Best thing would be to trade with a qty that would not give you pain if you make a loss. Trade with the same qty until you master what you are doing (This may not happen in matter of two or four months, Took me years with one method and still making mistakes
) Gradually increase position. Dont double it overnight after one or two huge profit trades.
In short, take your time( six months, 1 year whatever you need), design a method, Backtest it on past data. Start trading on real time with small capital and size.
Hope it helps... :thumb:
