Trading rules in stock market for beginners

trading rules for beginners
Whether you enter the market with a trading mindset or an investing mindset, you cannot deny the fact that you want to make money fast and get rich as quickly as possible. You are also unsure about your attitude, whether you are made for trading or investing or none of that, and how much return can be generated realistically from either investing or trading. 

Well you need to find those answers yourself by experiencing the markets and reading others but if you want to be a successful trader then following are some of the very important rules to remember. These trading rules are compiled from the saying of some of the most successful traders on earth.

1. Never, add to a losing position.

2. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.

3. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is "low." Nor can we know what price is "high." Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed "cheap" many times along the way.

4. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral.

5. Try to trade the first day of a gap, for gaps usually indicate violent new action. 

6. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it.

7. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.

8. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.

9. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. 

10. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.

11. Bear markets are more violent than are bull markets and so also are their retracements.

12. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.

13. The hard trade is the right trade: If it is easy to sell, don't; and if it is easy to buy, don't. Do the trade that is hard to do and that which the crowd finds objectionable. 

1 comment:

jems patil said...

Hi Amit,

I am regular reader of ur blog. you are doing good job. you provide very helpful information regarding market. I going to start day trading in market. but I dont have much knowledge of it. if you could some more information on day trading or some reommended reading or tools, sites that might be helpful. thank you...

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