Always Manage Risk – Managing risk is crucial because if
you do not preserve your capital and manage your trading risk properly you won’t have money left to trade. This is by far the most important trading rule to follow!
Trading Along With the Market Trend – is an old adage on Wall Street. As the saying goes, “The Trend is your friend”
Maintain Stop-loss Order – A successful Trader must use stop-loss orders or trading alerts to protect capital, and employ a disciplined mindset so he/she can live to trade another day. One wrong trade can lost all invested fund.
Take profits, book losses – Trading is all about closing out positions. You are a trader. If you see profits you take it and then look for the next trade. If you are running losses on your positions, book the losses to live for another day. There is always a next day in trading.
Learn to handle stress: Trading is stressful. You are risking money to make money and that is a highly stressful activity. You will need to handle the stress that comes along with positions running into losses. There are many ways to handle stress and you will have to find your own way. If you cannot handle stress, stop trading, it’s not meant for you.
Difference between “INVESTOR” and “TRADER” Investors:
Investor– Individuals or entities who use their own money to purchase equity securities, which offer potential profitable returns in the form of interest, income or appreciation in value in long run.
Traders: Take leverage (Margin) on behalf of his invested fund, do the work with full capacity for earnings. Individual engaged in the trading of equity securities, or the transfer of financial assets in any financial market, either for themselves, or on behalf of someone else. They operate in the capacity of agent, hedger, arbitrageur, speculator or investor.
Major difference between Technical and Fundamental Analysis
- Uses price movement of security to predict future price movements
- Data gathered from Charts
- Time horizon is Short-term or Intra-day
- Main Function For Intraday trading
- Calculates stock value using economic factors, known as fundamentals.
- Data gathered Financial statements
- Working on the basis of EIC Framework (E-Economy, I-industry, C-Company)
- Time horizon is Long-term
- Main Function is investing in long run