4 Things You Must keep in Mind While Trading In Stock Market

Stock Market is one of the lucrative platforms which has a potential of making someone very rich, but to be honest comes with an inherited risk of losing money. Stock Marketing is a kind of sea of money with huge waves, if you know how to surf you will conquer it, or else if not prepared you will be drowned.
This article is for those who wants to start trading or already a beginner and looking for some brief guidance. You must start stock trading, keeping in mind that “Market is Supreme”. But obviously it is not impossible to get success in stock marketing. In a nutshell, there are four very important points that you must kept in your mind to become a successful trader in stock market - Capital, Knowledge, Mindset, Risk Management. If any one of these components is missing you cannot make it in Stock Market. Let us discuss them one by one.
1. Capital:
The very simple fact is that — you cannot trade without money. But the question is how much money do you require to start trading? Well, there is no minimum or maximum limit theoretically. You simply need to have sufficient capital to cover the price of a stock. And there are many penny stocks out there in market and obviously you cannot expect a handsome earning from that. But practically you should be able to cover all the stocks, albeit it is not a hard and fast rule. Higher the amount higher will be the flexibility to trade. I have seen people earning around 2–3k Rs per trading day with an average investment of 80k by doing derivative trading on indices and by no means I am saying that they do not lose trades. They do lose trades, but risk management comes for the rescue. As you gain experience in stock market, you will increase your investment. I have seen experienced retail traders investing 10–20 lakh or even more than that (Not counting the big guys).
2. Knowledge:
Without knowledge you cannot and should not do trading. Consider trading as a job without a boss above you. You must be equipped with all tools to get the job done. There are various sources from where you can get the knowledge of stock marketing. Standalone paid courses, online portals like varsity by Zerodha, Investopedia are some great options you should consider learning A to Z of stock marketing. Fundamental and technical analysis are two utilities you will use to make informed decisions while trading. Fundamental analysis consists of explicitly study of companies to conclude the future trends of the underlying stocks. Technical analysis includes study of candlestick patterns, chart patterns, important levels etc. You will get to know about different type of trading forms like Day trading, Scalping, Swing trading and position trading. There are several options for investment. You have stocks, commodities, mutual funds, ETFs, currencies and indices (Nifty 50 or Sensex) equipped with different instruments like derivatives (Futures and Options), retail prices of stocks etc. One cannot practice swimming in sand, one must jump into water. In a similar way you cannot learn trading just by getting knowledge, you must gather experience of it in real time. You may do paper trading for the sake of not losing real money or you can trade with real money. Along with knowledge and experience, you also need a mindset or psychology of winning traders.
3. Mindset:
We can draw parallels between trading and riding a rollercoaster with higher ups and lower downs. As you begin trading you mistakenly believes that all you need to do is find a great strategy and apply it again and again. Though you might be on the right track, but a little pullback can make you feel uncomfortable and you will exit the trade with a small loss instead of huge profit. You must be discipline and serious about it, otherwise the market has the potential to pull off your capital away from you and that is one of the reasons why many traders fail in stock marketing. Market can also be intimidating and greed to earn more and more can be the recipe of your loss. You must control yourself against over trading which can lead to nullification of the profits you have earned that day or that week or that month perhaps. You will lose money initially, but with time you will get it back. Here are some traits of successful traders:
1. They do not hesitate to take risks.
2. They accept the uncertainty that is inherent in trading.
3. They are quick in adjusting their strategy with changing market.
4. They try to remain emotionally neutral irrespective of their winning or losing trade.
5. They evaluate and review their performance regularly.
So, you will be requiring this kind of mindset in order to conquer the market.
4. Risk Management:
Risk Management is very important technical aspect of stock marketing. Although you get to know about risk management while studying stock market, yet it requires an individual’s attention. You should notice that against every winning trader, there is always a person who is losing his/her money. Someone has to lose money, it is inevitable. You might be the one. You cannot control the objective outcome, but you can control the amount through risk management. It is as important as making strategies, may be even more important. Risk to reward factor is an important factor, trader always possess in their mind. That is a separate topic of discussion which you can study from multiple resources. There are several events like Harshad Mehta scam which ended up as a nightmare for many traders who have not traded with limited risk.
So, these are the four important points in brief that you must inherit within yourself in order to become a successful trader and attain financial independence.