RULES TO AVOID FAILURE IN STOCK MARKET AS TRADER
In the market, there is a favorite quote “99% trader fail in the stock market”. Many people not accept this fact until they lose money in the market.
They called themselves as traders simply as they just buy and sell shares in the market. The question is how they are analyzing the stocks, on what basis they select the stock that is a million-dollar question.
Most people take a trade based on the news, reading articles, YouTube channels, and sometimes blindly follow the stock market gurus. Trading is a professional business, but people take the trade as gambling.
An educated trader, however, know the importance of
· Risk management
· Implement the money management rules like stop loss and position sizing
To ensure their minimum risk and maximum profit.
Here we will provide ten rules of trading for the Robin-hood traders, once they follow the rules, it will change their psychology and start a professional way of trading.
TRADING RULES FOR TRADER IN STOCK MARKET:
RULE (1) – UNDERSTAND THE DIFFERENCE:
You need to understand the difference between investing and trading, it’s altogether different. You would be surprised as many people interpret a trade as an investment. Let us give a proper differentiation to the robin hoods.
Investing focuses on wealth creation over a period of time.
The main focus is on compounding and reinvesting dividends and profits back to the same stock or portfolio.
Investors will focus on the fundamentals of the company and its business model.
Investors will strongly hold their stocks in a downtrend of the stock because they believe it will come back to the normal situation.
Trading is a short term. A trade can range from seconds, minutes, hours, weeks, or even months.
The frequency of timing is what separates trading from investing. Traders depend on the technical analysis and chart setup to identify the trade opportunities in the market.
But the goal is the same, making money in the market. What makes the difference is professionalism.
RULE (2) – LEARN FROM LOSSES:
Don’t hesitate to cut the loss early, think of losses as a lesson.
If your first trade is lost, it can be beneficial to you because it will get into your analysis of what you did wrong.
If your first trade is a winning trade, you are more likely to keep trade without analyzing what you just did.
Track your trades in excel and keep on analyze every trade.
RULE (3) – CONTROL YOUR EMOTION:
In order to make a consistently profitable trader, you must control your emotion.
Detach yourself from the emotional aspect of making and losing money.
Money itself is never actually lost. It is simply transferred from one person to another.
If you lose money in the trade, you get depressed on other hand making money makes excitements.
Follow the logic of your trader not emotionally get into it.
RULE (4) – DON’T CHANGE THE RULE (1):
Follow your rules correctly. If you have identified a possible trade, make sure to keep it as a trade. Sometimes people will get a good amount of profit in a trade, they converted into investment. “Trades are meant to be trades and investments are meant to be an investment”. Remember one thing, trade is currently profitable doesn’t mean it will continue on that path.
RULE (5) – DO YOUR OWN ANALYSIS:
At the end of the day, it is your own money, no one will have care about your money than you.
You can find many tips on the internet, market gurus give short-term ideas but the majority of them make you bleed.
Find the experienced person in the market, watch their trade, and learn from them. Also, Do it yourself (DIY) on what you are going to do.
Maybe you can lose, but you will learn why you are losing and will never commit the same.
Don’t rely blindly on these people’s trade ideas, rather yourself analyze.
RULE (6) – KEEP A DISTANCE FROM THE CROWD:
You might have knowledge of the stock market and can earn money in any market condition. It doesn’t matter, how the overall market is performing.
Traders lose their money because they follow the crowd. Robin hoods make millions of dollars by following crowds, but they lose the money in the next one or two trades.
We are here to make consistent profit in trading and develop unique strategies that are not easily seen by the masses.
RULE (7) – LIMIT YOUR LOSSES:
It is very difficult for many traders to cut losses quickly. They are mentally prepared for the notion that the trade will eventually turn in their direction.
What if it doesn’t? Traders lose the entire money in a single trade. Learn to accept the fact that losses are part of trading but once in out of control don’t hesitate to cut the losses quickly.
RULE (8) CONTROL FEAR:
Sometimes traders miss out on the really profitable trade, which leads to desperation.
They entered the new trades too late or too early. There are thousands of opportunities in the market.
You need to discover the best trade and that is your job. Overthinking about the missed trade psychologically affect your trade decision.
RULE (9) – DON’T TRADE BASED ON THE NEWS:
You will rarely make money if you trade based on the news. You might get a lottery from one or two trades but in the end, you will lose entire money in the long term.
Follow the formula below and you will learn to rely on yourself and not depends on the breaking news.
Logic + statistics – emotion = profitable trading
RULE (10) – AVOID TRADING FLOW ONLY:
There is nothing wrong with the flow trading based on the price and volume increase on a particular day.
It will give a profit for that day but make sure to close the position as a momentum swing is over.
The same principle never applies to the other trade. Trading flow can be profitable in short term but long term you shouldn’t rely solely on volume and price.
CONCLUSION – FAILURE OF TRADER IN STOCK MARKET:
· Keep on learning, do paper trade, and analyze every trade.
· Don’t rely on the stock ideas from an unknown person
· Fix your mind with the above ten rules
· Every day set your mindset and prepared the trade set up
· We are writing these rules based on our experience.
· If you do not sustain in trading for more than two years, you cannot consider yourself as a trader