In this post, I will mention very important tips for new/amateur traders which can help them to remain profitable over a longer duration.
- Never ever use your the whole money in a single trade: For eg, if you have 50K trading capital, then use only 8k-10k per trade. Using just 8k-10k you will be able to get a leverage of 10X-20X which means you can buy or sell shares/contracts worth 80K -2Lakh.
- Trading is 70% money management and 30% good trading skill: Generally, beginners think that using this or that indicator they will be able to find the trend and they will be able to trade properly. But the truth is that most people are able to find profitable trades but they lack money management skill and because of which they end up in making huge losses.
- Do not use more than 3-4 indicators in your trading setup. A Trading setup should help you in making a wiser decision but not to complicate the situation when you need to make a faster decision.
- Follow your trading setup rigorously: Lot of beginners always try to look for new trading setup and they never master one. There are lots of trading setups which can give you a profitable trades. Knowing one of them is enough for you to make a good trading decision.
- Plan your position in advance: Whenever you enter into a trade, plan your risk ahead of entering into the trade. For eg., If I am going long on SBI then I am willing to risk 500rs for a reward of 1k or 2k. So this (500rs) risk should be same in all of your trades and your Risk/Reward ratio should be greater than 1:1.
- Never trade without a trading Stop Loss: Beginner traders usually have a habit of entering into a trade without SL. They exit when losses are visible above their expectation. In capital markets, you never know when your trade turns opposite to you. And because of which you end up making a huge loss instead of small one.
- Do not Over Trade: Most of the new traders have a habit of trading continuously even if they have made a decent profit for the day. So the rule is to close your trading window/app once you are done with your daily profit targets. Generally, new traders end up in loosing all profit due to over trading.
- Do not exit trades by placing market orders.: When we exit trades using market order we get slippage. If you are trading small quantity then market orders will not make much of difference. But if your trade quantity is huge then 50 paise of slippage will affect your profit or loss.
I hope it helps.