Golden Rules of  Trading

Stock markets are highly volatile, the share prices fluctuate to mean and extreme levels. To make a dent in this profession, as a trader you will have to move tightrope.

You need to be alert and follow all practical principles that apply in the making of money in stock markets. 

Experts have defined a set of golden rules that shall enable you in making decent money from the stock markets ( NSE/BSE). Please read its description below.   

Chalk-out a Trading Plan

Depending upon the kind of trading you commit, the strategies and tactics change accordingly.

You may plan for day trading, swing trading, option trading or even futures & Options trading. In each form of trade you will have to execute entry position, exit position and maintain sufficient trading capital. 

You must employ paper trade to test your plan and only after good results you must progress to invest in your designed trade. The paper trade results are obtained from the development and backtesting of the plan. 

You may come across instances when your trade plan may not function well. You must immediately backout and close the trade with minimal losses. 

Note: If you execute a plan that lies outside the purview of the designated trade plan and succeed in your attempts, you will be known as the winner but exponents shall say it as an implementation of the ‘poor strategy.’

Build Trade Business Steadily:

Looking into the trading features, initially, you can start day trading involving buying/selling activity on the same day. Likewise, conduct swing trading that allows you to sell the purchased stock after a couple of days to a few weeks. 

In any form of trades, it will take laborious time to analyse chart patterns drawn on timeframes. Further, for each trade, you need to employ fundamental analysis, collect corporate news, and the generated market sentiments from time to time. With so much of research and analysis, it will peel off the time and ultimately it will compel you to get into a full time profession though it was started off to be a hobby. 

Hence, you must realize that trading is a business involving high risks, incurs expenditure, taxes, and stress. 

Technical Analysis:

Many online companies have come up that provide charting patterns on your chosen stocks. Companies like Zerodha, Tradeviews, etc provide complete guidance at the technical upfront. 

These charting companies support you by providing backtesting features to reduce the market risks and losses. 

Companies have made apps (Axis Direct App, Share Khan, Groww App, Angel Broking, etc) that can be loaded on mobile smartphones ( Android/IOS platforms) and monitor your trades from anywhere during the trading sessions. 

Never Risk Your Trading Capital:

For every trade, do not invest more than 1% of the trading capital, any unusual movement of the stock patterns can siphon your trading capital as well. 

Make investment on low price stocks but do not invest on high price stocks that affect your trading capital when your trade investment is low. 

In a trade, 

If your trade is doing well, wait for some time and use trailing stop and do not book profits early. 

If your fundamental analysis, technical analysis, or risk management fattens your expectations then close off position before it incurs heavy loss. 

Apply Risk Management:

Through the process of trading, apply risk management techniques to identify, assess, and mitigate the potential loss in trades. 

Trade your Established Plan:

Utilise the technical analysis, set the price, stoploss and work accordingly, but never operate the stocks as per your predictions, or opinions. 

Discipline & Patience:

Keep up your patience levels and maintain discipline while executing your trade plan.