Here is a beginners guide to become a Successful Stock Market Trader.
We will discuss in detail about step by step process, also about traders types, Trading types here & India’s successful stock market traders.
Lets get Started.
A Successful Stock Trader is an Informed Trader
A Stock Trader invests in the financial market. There are two types of traders, individual traders, and company traders.
We refer to individual traders also as retail traders. They usually buy and sell stocks through brokers. The company traders usually deal with stocks for big investment companies and firms.
We can categorize retail traders further into three types, the informed, the uninformed, and the intuitive traders.
We also refer to these informed traders as technical traders as they analyze and strategize the market.
They monitor momentum charts of the stock markets. The informed traders focus mainly on earning and financial ratios.
The uniformed traders as the name suggests, are also noise traders because they make trade decisions based on ongoing news without analyzing well.
They mainly research on volatility and building a large capital.
And lastly are the intuitive traders. They use their instincts to determine future opportunities.
They rely on their experience more and may know the impact on the stock market from any major events or mergers in the market.
To become a successful stock market trader, you should follow the trait of an informed trader.
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Tips to Become a Successful Stock Market Trader
Here are few very important steps which everyone must follow to become a successful share market trader in India.
Step 1 to Become a Successful Trader – Basic Knowledge about Stock Market & Trading
The Step 1 to become a successful stock market trader is to have a basic knowledge about share market & trading.
Trading is a technical skill that requires some basic knowledge about trading. To profit from the trading of stocks, one needs to understand this skill well.
Learning would help achieve financial goals. Always set some time aside to research and learn about the market.
Books on stock market trading can also be helpful in understanding better. You could also study through various courses available to know better about the trading.
Analyze how the market works and strategies about the profits and losses. Employing technology in trading gives more freedom to the workers of the company.
For example, if an employee is given a task to record particular data and due to some circumstances if he is not able to report to the firm, he can finish the job from the place he is present at.
Technology can also be used for thorough research of different investment opportunities.
Step 2 – Trade with Extra Money or Capital
A Trader should only trade in the market with extra money or capital, this is a very important trait of a successful share market trader.
To start trading in the stock market, you would require money to buy the stocks first. Hence set aside money that you wouldn’t mind losing.
Do not use capital required for your daily needs. Using food or rent money is wrong as they are necessary for a stable existence.
Start saving while you are learning about the stock market so that once you have saved enough, you can move forward with the trading.
Initially, huge manpower had to be employed in the job of storing data. There was quite a big investment in storage space too.
These costs then reduced because there is only one operator who enters the data and the storage is maintained in devices such as hard disk which will save a lot of space.
Step 3 to Become a Successful Share Market Trader – Learn New Skills & Take out Time Daily
To become a smart & successful trader, you should learn all the necessary skills required to make more money in the stock market.
You need to be determined on the goal and set some time aside every day for trading and learning new skills.
Always keep a loose eye on your profit levels and do not make decisions based on greed to earn profits.
Make a strategic plan that works for you before buying or selling any stocks. Using a plan for investment in stocks, results in fewer chances of failure.
A smart skill for any new trader is to use Stop Loss with every trade & use hedging to mitigate loss.
Step 4 – Starting Small & after proper Learning go Moderate
A smart Share Market Trader always start with small amount in the market & his/her main focus should be learning, since that goes a long away.
In trading, losses are inevitable and the best thing to do is to learn from these mistakes and making sure that there is not much of the monetary loss.
So, to become a successful trader, you should always start small & once you gain experience, you trade at moderate level & at the right time, you go big.
The right is very rare, generally when there is a positive news or there is a major slump in the market.
Step 5 to Become a Profitable Stock Market Trader – Don’t Start with Day Trading
New traders usually emphasize the smaller time framed investments but you require a good experience for the same.
As a new trader, starting off with long term plans is better since it is easier to monitor the price structure and its analysis.
The short term requires a lot of technical and analytical experience which we gain with experience.
Hence, new traders should focus on positional trading as it involves less trading and more of observation.
Once, you have enough experience & you understand technical analysis & have learned those skills, you can go for Day Trading & BTST.
Step 6 in Successful Stock Market Trading – Focusing on Survival
As Day Trading or Short Term trading requires exceptional skills, it is always better to start small & survive for the right time. This right time will make you big money.
You need to predict a final outcome of an investment. Always separate the savings from investments from the emergency funds.
These funds help to stay afloat and fulfill any ongoing risk of capital. You should only bring the risk capital in the market as that would not affect the rest of the funds.
Step 7 to Start a Profitable Share Market Trading – Foresee & Manage Risks
A new trader needs to understand how to manage the risks involved in an investment.
An emotionally calm trader has higher profitability rates because ⅓ of the trading involves logic and thinking.
By setting positions or stop losses would help in getting out of an investment without incurring more growing losses.
Step 8 to Become a Successful Stock Market trader – Don’t Give up too Easily
New traders tend to give up really early as the first few years of trading is more about researching and learning.
Also, there are more losses we could incur during the initial stage. All successful traders have a 60% winning percentage which is the ratio of their wins and the losses.
Any well developed and strategically planned investment in the trading system can result in a consistent stream of income.
Few Takeaways from these Steps
To trade in the stock market, no specific degree could be beneficial.
Various books regarding the stock market will help in strategizing the investments in a better manner. Staring out with a smaller amount is always proven to be better.
You need to keep in mind the personal financial restrictions and study and research regarding the minimum deposit schemes and choose the one compatible with your investments.
An investor should always aim for a low amount to buy a share and a greater amount earned after selling this share.
Various Types of Short Term Trading which a Successful Trader Operates
Types of trades have four different categories and the details are as follows.
Day trading involves buying and selling stocks in a single day. Traders hold stocks for a couple of minutes or hours for a day. They have to close all transactions before the day’s market closure.
For day trading, you need to understand the fluctuations and efficiently analyze the volatility. Mostly, expert traders prefer and use day trading.
It is also called as the micro trading. The day trading as well as the scalping are two categories of Intraday trading.
This trading focuses on gathering small profits from around more than 100 transactions in a single day.
Every transaction may not result to profit. At times, there are greater losses than profits. They hold these stocks for a maximum couple of minutes.
It is a bigger frequency of trading and it may also require awareness for analyzing and experience for prompt trading.
It mainly follows a short term pattern. The stock can be bought and sold within 7 days. They need to analyze the movement pattern and follow a proper execution to achieve the financial goals.
They drive benefits from the stocks by monitoring the movement of stocks. They identify whether a stock is about to mature or is already matured.
The upwards and downward movement of stocks is highly important because, during the upward movement, one usually sells the stocks to earn greater returns.
Whereas during a downward movement, one can buy more stocks to hold on until their prices rise.
Successful Share Market Traders of India
Here are few well known Stock Market Traders –
- Rakesh Jhunjhunwala
- Vijay Kedia
- Raandeo Agarwal
Sharing a common interest of stock trading with his Father, he began his trading journey from 1985.
His first biggest success was buying 5000 shares of Tata which he bought for 43rs each share and which he sold for 143rs each share within 3 months!
He has bought many shares in renowned companies and now his trading portfolio is worth 20 thousand crores.
He is a well-known trader in the Indian stock market and trader who is also called as the Indian Warren Buffet.
From a family of stockbrokers, Vijay didn’t start investing as a choice but because he was the sole breadwinner of the family.
Now a successful investor, many of his initial investment incurred losses but he did not give up.
After learning the basic fundamentals of the companies, he strategized his moves and his investment multiplied 6 times.
He believes in the motto of reading and researching to acquire the knowledge required for stock trading.
The founder of Motilal Oswal group, he started trading in stocks from the early 1980s and made a portfolio of 10 crores.
After reading tips from Warren Buffet, he picked quality stocks which led to doubling his portfolio. His current net worth is around 6.5 crores.
Become a Successful Stock Market Trader – Conclusion
The knowledge gained from researching and learning different skills would be of great help. One needs to be patient, have the will to learn, and acquire the skill set to become one of the successful traders.
Learning through mistakes and gaining experience is equally important. Stock market trading is a learning process that cannot be acquired over time.
Always use various try and error methods and strategies and see what works the best according to your financial background and planned investments.
And do not give up easily as once learned well, stock market trading would be easier.
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