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Fundamentals of Share Market
Trading is not an exact science. You can’t do X and get Y every time. It is as much an art as it is anything else. There is no magic formula.
Trading is all about probability. It is the art of correctly applying a set of a carefully thought out rules and allocating the probability of that event to result in success.
Each trade is an independent event. The market does not remember if you lost or made money the last time you traded.
The way you approach the market psychologically has as much to do with your success as any trading plan.
Money management is crucial if your personality is the only way you will ever feel comfortable in the markets.
Matching a method of trading with your personality is the only way you will ever feel comfortable in the markets.
An adequately funded account is necessary not only to be able to take the trades you want but also so you don’t feel every trade is a live or die situation.
15 Ways to Avoid Losing Money Trading
1 Knowledge Deficiency Ė Most new traders doesnít take the time to learn primarily fundamentals. When news or a statement is due out they must close the positions and sit out the best trading opportunities. They are taught to only trade after the market clams down. So essentially they miss the whole move and then trade the random noise that follows a fundamental price move.
2 Over Trading Ė Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to ďjustĒ make a few hundred rupees a day by locking in tiny profits whenever possible a losing strategy.
3 Relying on Others Ė Real traders play a lone hand: they make their own decisions and donít rely on others to make their trading decisions for them: there is no halfway: either trade for yourself of have someone else trade for you.
4 Stop Losses Ė Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop.
5 No Trading Plan - Make money is not a trading plan. A trading plan is a blueprint for trading success: it spells out what you see your edge as being; if you donít have an edge, you donít have a plan, and likely youíll wind up a statistics (part of the 95% of new traders that lose and quit).
6 Exiting Trades Poorly Ė If you put on a trade and itís not working make sure you exit properly; donít compound the damage. If youíre winning trade donít talk yourself out of the position because youíre bored or want to relieve stress: stress is a natural part of trading: get use of it.
7 Trading Too Short Term Ė If youíre profit target is less than 5 points donít do the trade; the commission you pay to enter and exit the trades makes the odd way against you when you go these tiny profits.
8 Not Trading Around News Time Ė Most of the big moves occur around news time. The volume is high and the moves are real; there is no better time to trade fundamentally or technically than when news is released; this is when the real money adjust their positions and as a result the price changes reflect serious currency flow.
9 Emotional Trading Ė When you donít pre-plan youíre trades essentially itís a thought and not an idea; thoughts are emotions and a very poor basis for doing trades. Do people generally say intelligent things when they are upset and emotional; I donít think so.
10 Lack of confidence Ė Confidence only comes from successful trading. If you lose money early in your trading career itís very difficult to gain true confidence; the trick is donít do off half-cocked; learn the business before you trade.
11 Lack of Courage to Take a Loss Ė These is nothing gutsy about riding a loss, just stupidity. It takes guts to accept your loss and wait for tomorrow to try again. Getting married to a bad position ruins lots of traders. The thing to remember is the market does crazy things often so donít get married to any one trade; itís just a trade. One good trade will not make you a trading success; rather itís monthly and annual performance that defines a good trader.
12 Lucky or Good Ė Your account balance changes donít tell you the whole story about your trading; fact if youíre taking a lot of risk and making money you will eventually crash and burn. Look at the individual trade details; focus on your big loses and losing streaks. Ask yourself this; if had a couple of consecutive losing steaks or a couple of consecutive big loses. How would my account balance look. Generally, traders making money without big daily loses have the best chance of sustaining positive performance. The others are accidents waiting to happen.
13 Quality Trading Time Ė We suggest 3 hours a day of quality, focused trading time; thatís about all your brain allows. When your trading being 100% focused; half way is bullshit it doesnít work. Donít even think that time spent in front of the computer watching the rates has any correlation to profitability; it doesnít , spend less time but when your trading be 100% focused on trading.
14 Rationalizing Ė Killer, Absolute killer. Put your trade on and let it run. If it hits your reasonable pre-determined stop youíre out. Think of yourself as a prizefighter; you just got knocked out. Moving your stop is like getting up after being crushed with a knockout. Come back the next day and try again. A small loss will not hurt you instead of loosing full money.
15 Overconfidence Ė Trading is not easy; statistics show 95% failure rate. If youíre doing well donít take your success for granted; always be on the lookout for ways to improve what youíre doing.
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