Essentials before starting to trade
The prospect of making quick easy money draws people into financial trading. People with an intention to make money, pick scrips and trades based on their gut feelings and intuition. They might get lucky a few times, but they end up being losers. They don’t have any plans for trading in the market. In this article we will see a few things which should be important for a trader wanting to excel in the financial markets.
To be a successful trader, the first and foremost requirement is a formal training. Many people don’t know the importance of a formal education about financial markets. It is imperative that a trader learns how a market functions and the market dynamics.
This education is not only for exceling as a trader, but also to understand various products these markets offer. Even PhDs start from kindergarten. This formal training will help us in designing a good rading setup which is an absolute necessity. A common misconception among most of the people is that, it is unworthy to spend on formal education. Reading about markets is no substitute for practical training. If you are serious about becoming a trader, the price you pay for a formal training is probably, the best investment you could make.
Making plans for trading involves two things, firstly, we have to analyse the financial status of ourselves. We have to take stock of the expenditure, future financial necessities, savings and other commitments. Taking into account the financial situations, we can make better financial decision.
Secondly. We have to analyse the trade, this is where hands on training on financial markets will help, We should figure out the entry strategies, exit strategies, loss minimization techniques before placing a trade. It is important to learn, practice and analyse using one strategy rather than using different strategies. By practising the same strategy, we can get master that strategy and can base all or future trades on it. This can help in devising our risk reward strategy.
No matter how much you get trained and plan, the end result depends on the execution. Knowing fully well the randomness and uncertainty. It is advisable to do demo trading until we become emotionally comfortable.
Even while trading with a perfect trade setup, emotional incompetence may result in disaster. We must make use of these demo trades to evaluate our trading behaviour emotionally and psychologically. We must also make use of this time to perfect our trade routines. Remember, the battle is won and lost in our minds rather than in charts and computer screens.
Trading in financial markets is often compared with gambling. This is because of ignorance of the people. They enter the market without formal education and proper plans. They will invariably end up losing their hard earned money. To be successful as a financial trader, we must possess the correct attitude. This attitude is a combination of technical excellence and emotional intelligence. This attitude is also a result of hours of practice and inolvement.