How to trade online in indian share market
Based on the available trading or investing capital oneshould decide prudent limits one is comfortable losing, this is all the more importantbecause if one knows realistically the loss taking capacity, then trades will be donewithout FEAR of losing, and when fear is not disturbing, one can take decision from themind without any emotions attached.
Fear of LOSS is the biggest hurdle in trading andinvesting and the only way to overcome is pre defining the risk rules in the form of losslimits. Size of the Trade: Too often people, either, bet everything on one trade and go broke orbet too little to make any meaning full profits to remain in the business. Both will drivethem off the markets.
In the first case there will be too much emotional attachment orthe greed, but when the trade goes against, it will be hard to press exit button and theygo broke because the position was huge.
On a trading capital of sayRs 1 lac, one can afford to lose max Rs , therefore say for example ACC is trading at and stop loss is identified at , therefore max loss per share would be For capital of Rs. The above rules are notmathematical rules of exactness, but suggestive and are followed elsewhere as bestpractices in the industry. In trading one must have an exit strategy, i. Indecision will not help. Some have pre defined profit target of three times riskfor example if risk per trade is assumed at Rs.
Similarly there are different waysof exiting the trade, it is essential to have the exit strategy in place before entering thebattlefield called the stock market. In trading this is even more importantbecause leverage is used. One generally keeps a stop exit when price adversely moves beyond say 2 times Average true range ATR or crosses key support or resistance areas. Whatever may bethe strategy it is a must to exit a losing trade.
Every time no one is right all the time. Trading or Investment, both require different set of skills, mental attitude, and divergent rules. In order to be best in the class, one can therefore either be a Trader or an Investor. The important decision making points wherein strategy differs are Stop Loss or hold on, long term or short term, analyzing price or analyzing value, to follow the market or to predict are some of the contrasting and opposite action points which needs to be applied to either investing or trading to the exclusion of each other.
Markets are not one way up, after bull market, bear market is going to follow, so one should not be biased towards only long trades, selling short should also be done with the same ease.
By refusing to sell short one forgoes huge opportunity to make money when the markets are in bear zone. Always remember, money can be made in 2 ways a. Buying Low and Selling High! Selling High and Buying Low! The hardest thing in the financial markets is the ability to consistently execute the plan with the iron fist discipline, but which rarely happens and that is why results are so poor.
It is said majority of the people do not make money, because people lack discipline. Whoever does it has the riches. Trading and Investing are essentially interlinked with human emotions.
It the human being that makes the decision but the emotions act as a gatekeeper which filters out decisions. Any money making skills has to be self acquired , no one can forever depend on others, that they will make money for them. Similarly by depending on forecasters one constantly postpones efforts to self learn the art of making money through hard work and self study.
There is no substitute for self acquired knowledge and experience. You will have to write your own exam in the markets. No amount of copying, cheating will help you ace the exam! The economics of profit is simple, reduce costs, profits will automatically increase, other things remaining same. The flat fees of Rs. This may seem irrational but it is possible because of advent of technology, businesses are now becoming digital driving down their cost of operations dramatically.
The flat fee brokers like SAMCO are just passing on the benefits of cost reduction at their end which every trader and investor must avail off in order to reduce costs and increase profits dramatically. It is far more difficult to swim against the flow of the river, but very easy to flow with it.
Similarly once the phase of the market is identified bull or bear, then one should trade or invest in that direction. The vast majority of participants are not professional traders, let alone profitable traders.
Heed advice from forums with a heavy dose of salt and do not, under any circumstance, follow trade recommendations. Study the greats Learning about the greatest investors of years past will provide perspective, inspiration, and appreciation for the game which is the stock market. One of my favorite book series is the Market Wizards by Jack Schwager.
Read and follow the market News sites such as Yahoo Finance and Google Finance serve as a great resource for new investors. For in depth coverage, look no further than the Wall Street Journal and Bloomberg.
By monitoring the markets each day and reading headline stories investors can expose themselves to trends, 3rd party analysis, not to mention economic concepts and general business. Pulling quotes and observing fundamental data can also serve as another good source of exposure. Beware though, over time you may find that a lot of the investing shows on TV are more of a distraction and are overall full of junk recommendations.
This is a natural evolution; you are not alone! Consider paid subscriptions Paying for research and analysis can be both educational and useful.
Some investors may find watching or observing market professionals to be more beneficial than trying to apply newly learned lessons themselves. There are a slew of paid subscription sites available across the web, the key is in finding the right ones for you.
View a list of the services I use use myself. Two well-respected services include Investors. Go to seminars, take classes Seminars can provide valuable insight into the overall market and specific investment types. Most seminars will focus on one specific aspect of the market and how the speaker has found success utilizing their own strategies over the years.
Examples include Dan Zanger and Mark Minervini. Not all seminars have be paid for either. Some seminars are provided free which can be a beneficial experience, just be conscious of the sales pitch that will almost always come at the end. When it comes to classes, these are typically pricey, but like seminars, can also be very beneficial. Buy your first stock or practice trading through a simulator With your online broker account setup, the best way to get started it to simply take the plunge and make your first trade.
If trading with real capital is not possible initially, consider using a stock simulator for virtual trading. A variety of online brokers offer virtual trading for practicing.
One of the most common mistakes traders make is to go all-in and try to score big with a full portfolio position out of the gate.
This is an often painful mistake and why many new investors suffer big losses early on. Proper portfolio allocation is extremely important. For more tips of wisdom, see my article, 60 Stock Tips for Investment Success.