Trading is an art which requires a lot of training and detailed planning.
In order to understand trading better, experienced traders would normally expect a novice to take time out to sketch the major technicalities associated with stock market trading.
As part of this learning process, we bring to you 10 Commandments of Trading which are amalgamations of major rules in stock market trading that would help you take forward your dream of being a successful trader.
1. Knowing and Mastering Your Trading Strategy
Having a strategy and mastering it requires time, effort and discipline.
Most of the traders around us are in a hurry to reap profits out of the stock market and in this process, they do not have a clear strategy planned out for the trade.
This not only jeopardizes how their trade movements might pan out but also puts their money in grave danger.
There is no clear way to trade without a specific plan in mind.
Think of it as baking a cake – unless you know how much of flour to put and how many eggs to beat, would your cake turn out to be as tasty as you imagined it to be? No.
Gaining success in trading is not as easy as you might image it to be. It is a result of all the effort and dedication you put in – and not just a stroke of luck.
If you have mastered an effective strategy, it gives you a clearer idea of both losses and wins.
Take time to try out each of the trading strategy that you might come up with – things may sometimes take longer than expected to shape up.
Nevertheless, make sure you etch out a trading strategy, attempt to master it and make sure you stick by it to know how it works out for you.
2. Being Honest to Yourself
Giving yourself false hopes or discouraging yourself for no profound reasons can prove quite bad in stock trading.
Make sure you tell yourself, if not a trusted one, about your trading plans.
Make sure that you have a good hold over your trading accounts and capital.
In situations where you see yourself beginning to drown in debt, make sure you tell yourself it is time to stop throwing in money which you most definitely do not have.
Giving oneself false hopes does nothing other than boosting one’s ego which can only lead to a higher crash in the future.
Plan out your finances and be sure about where you are going with your trading strategies.
At the same time, if you constantly discourage yourself from investing or trading in the stock market, you would be stopping yourself from growing.
Success involves specks of risk and trading in the stock market requires you to explore areas you never knew existed.
Unless you explore and are willing to learn as you move ahead, this exercise would be of no use.
Make sure that you do not be the reason for your own stagnation – let yourself explore the world of trading with adequate knowledge and acquired strategies.
3. Ignoring Random Tips
How many times have online portals, chat sessions and blogs welcomed you with such statements?
While indulging in stock market trading, it is important to know that there is no particular approach or technique in the stock market which would promise the best of returns to everyone.
Each trader trades in his/her own unique way.
It is important to remember that the trading technique best suited for you would not be the technique best suited for a friend of yours.
Blindly following the online trends when it comes to trading would do more harm than good.
To understand that each approach is different and that each technique would promise different returns to each person is extremely important.
Therefore, the next time you Google for techniques which are popular amongst traders today, do not fall for statements like the one mentioned above – they are nothing but hoaxes.
4. Don’t Let the Past Get the Better of You
In the stock market, make sure that your past mistakes are just a reflection of what you must not do in the future.
They must not be procrastinated upon and they definitely must not affect your future trading strategies.
Make sure that you learn from the mistakes made and do not let them break you down.
They are just factors you can pick up as a lesson along your journey as a trader.
There is a whole trading approach – Technical Analysis, solely based on learning from past market data.
Create something new and profitable out of the weaker situations in the past.
They must not be factors that hold you back or make you doubt your instinct.
Do not let such mistakes get the better of you and force you into making mistakes that prove fatal for your capital.
5. Do not try to avoid losses – learn to control them.
Certain elements in trading like losses are to be controlled and not attempted to be avoided.
Your skills and your understanding of trading is tested when you learn to accept this one statement.
As a trader aspiring to be successful, you must make sure that you control your losses.
There are no traders in the world, no matter how seasoned, who have never faced any losses.
Losses are a part of the gain stock market trading offers us.
Make sure that your losses are controlled through your strategies and your trading plans.
Do not garner false hopes of never failing – because you will.
No matter how small the loss, the loss is an inevitable part of the gain.
7. Do not be overtly excited just about the money
Let passion drive you forward in your journey as a trader.
Dedication must be the fuel driving this passion of yours.
Be sure that you are in this for the love of it and not just to earn money.
If you solely think of trading as a means of earn more money, you would miss out on loving the art of trading and to explore little nuances in trading.
Unless you take a personal interest in trading itself, there is no way you are going to master this art.
It is only when you feel dedicated to a particular element that you attempt to understand it in its entirety.
Be a part of stock market trading to learn more about it – money is obviously a vital factor governing this want of knowledge but it should not be the only one.
8. Planning Your Trade
This is a commandment very often repeated in all write ups on stock market trading available to us today.
Being well updated about the stock market makes it easier for you to incorporate certain newer elements in your trading exercise.
Always make sure that you have a plan ready – one that outlines what kind of stocks or investment would suit you; how you intend to go about executing this plan; how much of capital are you willing to risk; and, what your other options would be if Plan A fails.
Making a clear note of all these factors would not only save you from all the last minute confusions once you enter the market but also keep a check over your trading activities.
For those who are trading novices, make sure that you acquaint yourselves with trading jargons and techniques in use.
There are several details available on our website in the form of eBooks and articles which would guide you through knowing these trading terminologies and approaches better.
You can find these under the SMS University at page.
9. Do not garner false hopes
Understand what you are getting into and how much of profit you could gain from it.
Entering the stock market with too much of expectations would not help you in anyway.
Make sure that you realize this to be a misconception.
Trading cannot always guarantee the return of high profits – just the same way it would not always bring you losses.
Know about the financial instruments you invest in thoroughly and make sure you foresee through your trading strategies about how much of profits it can bring you.
10. Be well versed with the idea of Trading
Trading, just like everything else, requires a little bit of prior preparation.
If you intend to be a trader in the future, make sure that you read up on the new techniques used in the stock market today.
There are hundreds of technicalities and approaches you could gather knowledge about, to make trading a lot easier for you.
If you enter the stock market without knowing anything about these nitty-gritties, you would be putting yourself in a precarious position and endangering your capital in the process.
Therefore, make sure that you know what you are doing and in order to do so, you must be well-versed with the ways of the market.
There are several eBooks and reports available on our website, which would help you in this attempt.
For more information on this topic, you may refer to: http://www.learntoradethemarket.com/forex-articles/ten-commandments-trading#close