Risk Capital
It is advisable that one would divide the risk capital in ten equal parts. Risk capital is the capital which you can afford to lose (Remember as there is profit there is loss too in share trading). Considering the successful money management one should keep in mind that none of the single trade should have more than 3 parts of the capital. it is advisable to keep some spare money to buy share when there is a buying opportunity.
Trading in active & high Volume Stocks
Always rely on high volume stocks over a period of time, but most of the time people invest in low volume stocks wanting for the liquidity. High volumes are advised for easy entry, exit and stop loss. Spread is too high in low volume stocks and the chance of stop loss failure is also too high, so it is advisable to go with high volume stocks.
Have a Trading Plan
Before investing money on shares be prepared to have a trading plan. One must keenly observe the market trend for atleast two before actually buying any share. Investing on right stocks or shares at the right time can fetch you great profit.
Dont be Evil - Never Over Trade
After few successful tradings most people makes this mistake of over trading. It wipes off all the profit and put the trader in heavy loss.here comes the risk capital, never ever trade beyond your risk capital.
Trade with strict Stop Loss
This is one of the important thing one should consider, at any time market can reverse so monitoring all the trades cannot be done so to avoid loss have strict stop loss. when market is up profit is more but one should consider the reverse also and it can sometimes happen without any indication.
Sell Short as often as you go Long
Most of common the investors/ Traders love to see prices going up only. Stocks are bought by to make profit on rise. They have large holdings and mentally they wish and pray for the market to rise only. But facts are different. actually the Bull Phases have shorter duration than that of Bear phases. Since most investors are Bulls by heart they normally do not book profit at higher levels to re-enter later at lower levels instead they prefer to increase their portfolio at lower levels. Successful Traders know how to capitalize such correction. They are always prepared to go 'Short' as often as they trade on 'Long' side.
Don't Trade if you are not Clear
Many Traders, because of their daily habits trade even when there are no signals to buy or short. Normally such situation arrives after a sharp rise or decline when stocks are adjusting their values. While some stocks attempt to move up, few may be taking breather before next move. Such situation are often confusing. There is no harm in taking rest for a day or two or short period if the trend is choppy, unclear or doubtful, instead of putting your money at higher risk.
Don't expect Profit on Every Trade
If you consider you are a smart trader who can make profit on every trade, you are 100% wrong. Always be flexible and accept the fact as soon as you realize that you are on wrong side of the trade. Simply get out of the trade without changing your strategy during the market; it may cause you double losses.
Withdraw portion of your profits
Share trading is an excellent business as long as you are making profits. Unlike other business your losses can be unlimited and rapid if market does not move as per your expectations. While in other businesses you may have other remedial measures available but in trading it is you only who has to control it. Traders have large egos particularly after series of successful trades and their tendency to enlarge commitments in overconfidence may cause major financial set back. There fore it is must that trader must take a portion of the profit and put it in separate account. This is absolutely must for long term stability in the market.
It is advisable that one would divide the risk capital in ten equal parts. Risk capital is the capital which you can afford to lose (Remember as there is profit there is loss too in share trading). Considering the successful money management one should keep in mind that none of the single trade should have more than 3 parts of the capital. it is advisable to keep some spare money to buy share when there is a buying opportunity.
Trading in active & high Volume Stocks
Always rely on high volume stocks over a period of time, but most of the time people invest in low volume stocks wanting for the liquidity. High volumes are advised for easy entry, exit and stop loss. Spread is too high in low volume stocks and the chance of stop loss failure is also too high, so it is advisable to go with high volume stocks.
Have a Trading Plan
Before investing money on shares be prepared to have a trading plan. One must keenly observe the market trend for atleast two before actually buying any share. Investing on right stocks or shares at the right time can fetch you great profit.
Dont be Evil - Never Over Trade
After few successful tradings most people makes this mistake of over trading. It wipes off all the profit and put the trader in heavy loss.here comes the risk capital, never ever trade beyond your risk capital.
Trade with strict Stop Loss
This is one of the important thing one should consider, at any time market can reverse so monitoring all the trades cannot be done so to avoid loss have strict stop loss. when market is up profit is more but one should consider the reverse also and it can sometimes happen without any indication.
Sell Short as often as you go Long
Most of common the investors/ Traders love to see prices going up only. Stocks are bought by to make profit on rise. They have large holdings and mentally they wish and pray for the market to rise only. But facts are different. actually the Bull Phases have shorter duration than that of Bear phases. Since most investors are Bulls by heart they normally do not book profit at higher levels to re-enter later at lower levels instead they prefer to increase their portfolio at lower levels. Successful Traders know how to capitalize such correction. They are always prepared to go 'Short' as often as they trade on 'Long' side.
Don't Trade if you are not Clear
Many Traders, because of their daily habits trade even when there are no signals to buy or short. Normally such situation arrives after a sharp rise or decline when stocks are adjusting their values. While some stocks attempt to move up, few may be taking breather before next move. Such situation are often confusing. There is no harm in taking rest for a day or two or short period if the trend is choppy, unclear or doubtful, instead of putting your money at higher risk.
Don't expect Profit on Every Trade
If you consider you are a smart trader who can make profit on every trade, you are 100% wrong. Always be flexible and accept the fact as soon as you realize that you are on wrong side of the trade. Simply get out of the trade without changing your strategy during the market; it may cause you double losses.
Withdraw portion of your profits
Share trading is an excellent business as long as you are making profits. Unlike other business your losses can be unlimited and rapid if market does not move as per your expectations. While in other businesses you may have other remedial measures available but in trading it is you only who has to control it. Traders have large egos particularly after series of successful trades and their tendency to enlarge commitments in overconfidence may cause major financial set back. There fore it is must that trader must take a portion of the profit and put it in separate account. This is absolutely must for long term stability in the market.
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