Technical Analysis of Stock Market for Beginners

“This chapter is about what are the most important qualities that a trader should possess. We don’t believe that you have to be very intelligent to become a successful trader; but, there are certain qualities & techniques which one must want to learn before entering into this vast world of trading.”.

When you thought first time you want to become a trader, what was the first question that came to your mind? It may be anyone of the following. What personality” traits should I have to become a successful trader? What kind of attitude I should have towards the markets? Is it necessary to have good knowledge about fundamental and technical analysis before entering the markets? Who can become a successful trader? What kind of strategies I should adopt to make money?

The first thing you need to do is to inculcate the some of the qualities in yourself. We believe, anyone can become a good trader but following are the important personality traits that a trader should have.

Passion

The first thing that a trader should have is the big word “Passion”. Passion is something that reflects in your personality, in your communication, in your attitude and behavior. If you are passionate about something you start enjoying it and it doesn’t remain your job or profession anymore but it becomes part of your lifestyle.

There are people who sit in front of the market since the opening of the market till its closing on daily basis. Many times they don’t do even a single trade in the whole day. But if they don’t sit in front of the market for few hours or a day, they feel that there is something missing in the routine. That’s the passion about the market.

If you are watching the markets on a consistent basis, you become a better decision maker. You are a better judge of the market even better than the experts. It’s always exciting to deal with the numbers. “If reading and understanding numbers is your passion, you can become a good trader.”.

It is not necessary that you are exceptionally intelligent to become a successful trader; or you should have a very sound knowledge of mathematics or statistics. Any average person with a little bit knowledge about the stock market can become a successful trader. Trading is a competition; anyone who follows discipline and keeps a continuous watch on the market emerges as a winner.

There are many of successful investors in the world and instead of saying anything else I would rather say that they all are exceptionally intelligent. All the investment decisions are made after making a lot of research. Investors satisfy themselves with the growth of the company and sustainability of that growth in the coming years. They don’t make any investment unless they feel everything in the company is going in the right way including business model, market share, customers and expansion plans etc. If your one decision goes wrong it may eat out substantial part of your investments. You don’t get a chance to review your decisions and again you will have to start the process of research and churning your investments. In history, few examples are there which proved investment research can’t tell you the exact position of a company. Satyam Computers and Lehmen Brothers’ were big shocks for the investors which forced them to go back and review all their investments.

But as a trader these can be considered as best of the opportunities to make money. Remember one thing if you feel you are stuck in a wrong position you need to hit your out (stop loss) immediately. Investors can make money only on one side of the market/stock whereas, a trader can make money on both sides of the market; they just need volatility on either side.

Confidence

Always the next big thing is ‘Confidence’ to be successful. You should have confidence in whatever you are doing. “Sometimes you may be right sometimes you may be wrong. The most important thing is the execution and for execution confidence is the most important quality.” Especially for a trader; confidence can turn you to be a victor. Lack of confidence will lead to doubt, second- guessing and you will miss out on various opportunities to make profits. It also leads to frequent losses; when you create a position after a long wait, you may be in a wrong position and that will force you to exit. You must believe in ‘yourself and your decisions’ to become a successful trader.

In trading fast and wrong is right and slow and right may be wrong. Hie statement says that if you are confident enough to hit a position, you should hit it immediately otherwise, you will be late and you may be picking up tops and bottoms of the stock. If you are wrong, you always have the option to hit your out (stop loss) losing a couple of bucks. You should be fast enough to create the position at the right level and if you are wrong you should hit your out (stop loss) faster. That will help you to control losses and protecting profits. If you are slow and create a position after a long wait, you may have already missed the move. After creating the position you will not be able to hit your out as you are slow7 and can’t make a decision quick enough, which will lead to ruin. Confidence will help you to create the position at the right levels and hit the out (stop losses) with minimal losses if you are wrong.

So always remember:.

“In trading fast and wrong is right and slow and right may be wrong.”.

Discipline

Exercising ‘Discipline * in trading can help you to be consistent. Every game has some rules; on the similar lines trading is also not an exception. Exercising discipline even in worst of the times can keep you out of the big trouble. There is a routine that you need to follow till you are part of trading. Do not allow emotions like ‘fear and greed ‘ affect your trading decisions.

You should be in the market at least half an hour before the opening of the market. Do the necessary research to keep yourself updated with any major event or activity which is going to happen during market hours and which can affect the volatility in the market e.g. interest rate decisions, fed announcements, inflation, future and options expity and earnings etc. If you are aware, you will not be surprised by any violent move in the market or stock of a particular company. Every day you should be ready with three stocks which you are going to trade today and find the important information on the same. When market opens in the morning you should be watching those stocks if those stocks don’t move then you should go ahead and look at the filters (high and low) for stock selection. Trade easy money not hard money and so on ... It takes some time to follow the system in a disciplined manner. You should avoid mistakes and do the things as simple as you can.

Decisiveness

Market continues moving, it does not wait for anyone to take decision. Therefore, you need to be very-very fast in your ‘Decision-Making’. “Decision needs to be timely on both the sides either on developing a position or getting rid of the same.” When you are in the market it’s not needed that you lug a position constantly, you need to rest like a mercenary guerilla and wait for the best chance to make a trade.

There may be couple of trading possibilities where you can make profit as well as several trades to make loss, however consistently remember that your losses must be very limited so that it does not take up all your earnings.

In some cases market is stuck in a variety and you are unable to go into a trade, so you make two or 3 sell the entire day and shedding or making a number of bucks. These days are considered as learning curves which will eventually assist you to come to be a far better decision-maker in the long-run.

Do not go into a trade without a reason. When you develop a position, you need to be sure of 2 points; one reason for the entry and also second out (quit loss). Every-time you can not be right to judge a profession so if you are wrong favorite your out (stop loss) immediately without any worry. For that reason making a decision the out (quit loss) is similarly important as factor of entrance to a field.

“When you create a position with a factor, hold on to your nerves; but constantly remember you may be incorrect, market is always best.”

Capacity to Accept Failure.

Excellent traders understand that several of their fields would certainly not go as per their assumption. However, they likewise know that nobody else should be criticized for a bad trade. A good investor takes credit of all his fields whether great or bad. Never ever before use the language of an unsteady trader:.

• • Market is extremely uneven today.
• • Every time market goes against me.
• • Why my stocks are stagnating with the marketplace.
• • Instead of all great signals market is not going sturdy.

and more ...

Being an excellent trader you ought to prevent all this. Do not beverage your head and consistently stick to the fundamentals of the trading. Don’t attempt way too many points. You cannot condemn the marketplace or any individual else for your losing fields. It’s simply you who is to be condemned or appreciated for bad or great fields. Following trading rule would aid you to hang on to your nerves as well as at some...