Professional traders in the stock market are excellent at managing their risk. They never expect to win all the trades rather they are always prepared to deal with the losing trades. As a novice stock trader, you should also do the same. If you start your stock trading career without considering the risk factor, you are not going to survive in this profession.
To become a profitable stock trader, you have to follow a strategic path. To ease the overall learning process, we are going to give five cardinal rules which can significantly improve your trade execution process.
1. Be a disciplined person
If you intend to involve yourself in the investment business, you should never break the rules. You have to be extremely disciplined with your actions. Only thencan you succeed in the retail trading industry. Most people think the stock market is going to offer them a quick profit-taking opportunity. But this is not how this industry works. You have to use rational logic and take the trades just like a professional businessman. If you intend to get rich within a short time, it is better not to trade the stock market.
2. Learn to trade with low risk
The new stock traders always trade with high risk. To them trading with high risk is the most effective way to become a profitable trader. On the contrary, the smart traders at Saxo capital markets trade this market with very low risk. They are well aware of the fact that they might have to lose money even from the best trade setups. Once you learn to trade with low risk, you will develop a strong analytical ability which will help you to find profitable trade deals. Moreover, you can embracelosing trades with a big smile. Thus the mental pressure will be much less predominant in your trading.
3. Analyze the major news
You must learn to evaluate the key news event to make a regular profit from this market. Novice traders often mess things up because they trade the market based on technical data only. The technical analysis is going to provide a partial picture of the market. To find the quality trade signal, you should merge technical and news factors. Once you do that, you should feel more comfortable with your trading approach and thus the overall trade execution process will be much easier. Never think you know every little detail of this market. Take your time evaluating the news data regularly.
4. Trade with low risk
Being a full-time stock trader, you should always trade the market with low risk. If you fail to evaluate the risk factors properly, you will keep on losing money. The maximum risk you should take per trade should never exceed 1% of your account balance. Once you start taking the trades with such managed risk, you will become more confident with your actions. Most importantly, you will learn to accept the losing trades. Losing trades are very common in your trading profession. Unless you learn to accept your losses, things will become tough and you won’t be able to withstand losing money. So take your time and learn to trade with a low-risk profile.
5. Stop trading with emotions
The novice stock traders love to trade with emotions. They don’t even know that they are taking the trades based on an emotional approach. To survive in the stock trading profession, you must learn to trade the market with zero emotional risk factors. Once you manage to do that strategically, you should feel more confident about your trading actions. Most importantly, you will become more cautious about your risk profile. If you ever become emotional when trading, walk away from your trading platform. Take a short break and try to regain control. Never trade the market when you are not emotionally stable.