7 Steps to Build The Best Trading Strategies
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In layman's language, we all know trading means to buy and sell stock from and to the market, but what most people are unaware about is the rules to become a successful trader. One should always remember it is not about WHAT you are trading in, it's about HOW you are doing it.
A successful trader is a disciplined trader. We may think it is easy to trade by simply buying and selling at the lowest and highest prices respectively, but there is more to it. Trading is risky. Therefore, to overcome the element of risk and be successful in day trading, one must be disciplined and follow the rules of this beautiful game.
If you are new to trading, then just breathe in and let the rules guide you through.
1. Be Optimistic Buy Also Be Realistic
How to become a successful stock trader in India begins with blending your optimism with realism. As a trader you always need to believe that there is another day for you to trade profitably. You cannot afford to lose hope and that is one of the 7 habits of highly successful traders. From Jesse Livermore to George Soros; they have all been undying optimists.
At the same time it is necessary to be realistic about your expectations. As a smart trader avoid falling in love with one stock or one strategy. Also be realistic about the returns you can expect from trading. Remember, trading is a way of earning through discipline not by taking on unbridled risks.
2. Learn From The Market Rather Than Trying To Outguess The Market
A lot of us tend to believe that the typical trader is a brash artist who takes big bets against the market. These are few and far between. Generally, trading is all about constantly learning from the market, having the humility to constantly tweak your strategies and try to be as close to the market trend as possible. If you want to know the 7 habits of highly successful traders in equities, then this point will rank at the top.
3. Focus On How Well You Execute Your Trades
If you were to look at a very meaningful habit among the 7 habits of highly successful traders then you need to focus closely on how to execute your traders. This has many dimensions. Do you place market orders or limit orders? Are you using charts effectively to identify good levels to enter and exit?
Do you buy your position in bulk or do you phase it out gradually? Normally when you phase your purchase or sale you can get better levels. Are you overbuying or overselling in the midst of momentum? As a trader, these small issues pertaining to execution matter a lot!
4. Be An Avid Reader, Researcher And A Learner
A lot of people may find this point slightly incongruent. You always thought that research and reading was for investors and not for traders. That is incorrect! To be successful as a trader in India you need to understand the companies you are trading in. Your approach to the company may differ but the trader also needs to research.
A trader needs to be absolutely well informed about the latest macro and micro events. That is the only way to take an informed trading decision. Above all, a trader needs to go through a constant process of learning and unlearning. You cannot be an outdated trader in the equity markets.
5. Have Patience
Patience runs parallel to discipline when it comes to successful trading. They are equally important attributes for a trader. It’s not likely you’ll become an successful trader overnight.
Expect the first couple of years to be a steep learning curve. It takes that long to experience different market conditions and to make a few mistakes all adding to your trading expertise. Trading sometimes require you to have the patience and discipline to do nothing.
Impatience may mean you take profits before a move is complete. If you have clarity in your trading strategy, you’ll have the confidence to avoid moves that could damage your bottom line. And patience means if you have had losses, use it as an opportunity to return to basics and gain a better understanding of price action.
6. Adapt to Changing Market Trends
What amateur traders lack is an individual trading technique or strategy that can help tip the scales in their favor. Master traders on the other hand develop numerous trading maneuvers and strategies over time.
Especially when combined, these strategies are extremely effective in predicting market trends, even small shifts. It’s therefore important that you come up with the individual trading maneuvers that separate you from the sea of similar traders.
One of the best and most important techniques in your trading strategy is the habit of keeping track of shifting trends in the marketplace. When you continually monitor the changes and shifts in the market, it is easier to develop a strategy accordingly and earn profit.
7. Use Smart Tranding Tools There Are Many Tranding
platforms that offer numerous smart trading tools and software to optimize your trading strategy and help you invest smartly. With the help of these tools, it becomes easier to predict market trends, whether the rise or fall of stock prices or potential shifts from one market to another.
Additionally, these tools can help calculate strike price or limit your budget to a certain amount to minimize losses. Automation tools can help make repetitive processes easier and help ease your workload. This way, you can focus on what’s really important.