I was reading an article, based on interview with a Trader,
which I feel worth sharing
1) TRADE ONLY WITH
WHAT YOU CAN AFFORD
Trading always
carries element of risk. Therefore to enter into trading activity one should be
prepared to lose the investment. It is therefore advisable to NOT to trade
using one’s Life savings, Instead use a
Limited Spare fund which can be risked for Loss.
2) THERE SHOULD BE
STRETEGY FOR EXIT
When entering
into trade, one should have a plan, What you want to get from that trade.
Therefore a strategy for exiting a trade is a determining factor of the outcome.
6% to 10% positive move seems to be ideal target. One should
not be lured for endless gain within a trade, else it ends up in Capital loss.
3) TRADE USING STOP-LOSS
ORDER
Stop-Loss order
is a automated order placement to sell, once the price reaches a price point,
which is a comfortable level for the investor, for bearing loss. This prevents
loosing money continuously.
4) WHEN TO TRADE.
It depends on
the person’s ability to identify the direction of the market, and trade in the
same direction as that of market.
5) UNDERSTANDING PRICE
MOVEMENT
At time markets
seems predictable. The target prices where the stock goes and may meet
resistance. This situation can be capitalized by entering at the right time,
capturing that move and moving out when the stock seems to touch a level, from
where it may potentially fall.
6) BUY HIGH AND SELL
HIGHER
Some experts
feel that when the market is having a northwards flight, one should make his
pick and get out when your exit target is achieved during this upward flight.
When the markets are falling, they seems to be falling
endlessly. This falling market is never right to enter, as erosion of capital
seems inevitable is such situation.
7) PRE-LEARNING BEFORE
TRADING,
It is said “INFORMED
INVESTOR IS A SMART TRADER”, it is always rewarding if one is educated about
the trade before investing, rather then doing practical first without learning
theory.