Here we list down 10 things you need to do incase you wish to excel in the world of stock trading.
Monitoring GDP growth rates, currency fluctuations, oil prices etc would help you figure out how certain stocks or the overall markets are affected. For instance, if oil prices are reducing you can expect stocks of paint or airline companies to rise as they source oil and ancillary products.
There are several videos on YouTube that have been posted by trading experts. Topics ranging from the most basic aspects of stock trading to complex ones are covered. There are professional traders who have also designed free courses and uploaded them on YouTube.
Get yourself acquainted with how to read technical charts. Initially, you may get overwhelmed with the various technical indicators which are used. Technical indicators are categorized across -> Trend indicators, Momentum indicators, Volatility indicators and Volume indicators. It is better to master a few important ones like: Trendlines, Simple Moving Average, Rate of Change, Relative Strength Index, Moving Averages Convergence Divergence, Fibonacci retracements and Bollinger Bands which fall across the categories mentioned earlier.
Your broker should also be able to help you out with offering access to various trading and analysis tools.
A passionate trader is always hungry for knowledge which comes from reading books, blogs websites, magazines, newspaper articles and appropriate posts on relevant forums. Some of the best traders have gained knowledge by whetting their voracious reading appetite with substantial reading hours.
**List Of Books You Should Read ** - Reminiscences of a stock operator by Edwin Lefevre, - Market Wizards by Jack D Schwager, - How to make money trading with candlestick charts by Balkrishna Sadekar, Stocks to Riches by Parag Parikh, Common stocks and uncommon profits by Phili Fisher, - Thinking fast and slow by Daniel Kahneman - Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay - Beating the Street by Peter Lynch
Being a trader will expose you to tremendous volatility on almost a daily basis. There could be times when you might end up losing a significant percentage of your trading capital due to a bad decision or an event which was completely out of your control. During such times, it is critical to seek advice from a mentor who has witnessed several trading cycles and has gained as well as lost money in the markets. The mentor will not only be able to offer you different perspectives but also help open doors to the fiercely protected clique of successful traders.
Your peers are on the same boat as you are. Some of them might be great at trading stocks, some may be focussed on bullion while others may be experts at commodities. Depending on which instrument you wish to trade, you can keep engaging with your peers for their inputs. They would also be happy to offer feedback. There are several Whatsapp and Meetup Groups where one can network with other traders. A quick Google search would help you out with both. Initially, you can join at least 4 Whatsapp groups and attend a few meetups organized by different Meetup groups. Over a period of time, you can choose which groups to focus on. This will help you form a strong network of traders. You can rely on their expertise as well as insights as you traverse through a journey to becoming a successful trader.
Macros create an impact that could involve a large population size and its effects would be experienced for almost a decade. For example, a well-informed trader would have realized during the runup to the 2014 elections that the Modi Wave was becoming stronger and would have accordingly placed appropriate bets. Macro trends sustain in an environment that cannot be controlled. There is a model called DESTEP to describe these forces as Demographic, Economic, Political, Ecological, Socio-Cultural and Technological. For instance, climate change is a macro trend which may influence traders to look at companies and deals happening in the renewable energy space. Macro trends always look at the ‘big picture’
Logging in the reasons behind making all your trades is a great system to develop. This will help you immensely when you go back to the drawing board to analyse your mistakes. Traders who end up repeating their mistakes also end up reducing the size of their capital.
There is no better way to learn stock trading than by doing yourself. You can either save up or raise capital to begin trading. However, do ensure that the capital used for trading isn’t large enough to give you sleepless nights in case your stocks fall and the markets are in red. You must also keep anywhere between 5% to 15% of your capital as cash to use during bottom fishing when high quality stocks suffer a significant but irrational fall.
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