If you’re a diligent reader of our
blog, you’ll have realized that we have an ongoing series where we teach
beginners the basics and ropes of trading. If you’ve been following said
series, then you should know a few of the trading basics, and should have a
DEMAT account ready to go. Additionally, chances are, you’ve made a few
experimental trades and have been researching well to pull the trigger on your
first major investment. We’ve now compiled a guide of things to keep in mind as
a beginner while trading, these should help you nurture a solid foundation, as
well as a reliable portfolio. Follow our tips and strategies, get the essential tools, and you should be
trading like a pro in no time at all.
Allocate Your Time
Since most traders start their
journey in the market as a part time activity, which is nothing to be ashamed
about, it’s likely that in some cases the time they set aside for trading will
be eaten up by other responsibilities or interests. In general, it’s easy to
dismiss your trading strategy as long term, invest, and leave it alone for a
nondescript period of time, however, even if you are planning long term, it’s
essential to keep a close eye on your investments. It’s a general rule of thumb
that if you’re a beginner or a part time trader, it’s good practice to allocate
two, one hour periods to trading every day, this includes research time.
Generally speaking, you’d benefit from one hour in the morning, shortly after
the market opens, and an hour in the evening, as the market is about to close.
You’d be surprised what great difference can be made just by a time investment.
Start Small and Work Your Way Up
This is a big aspect of trading
which tends to be omitted by beginners in their strategy. There is a
well-recognized tendency for people just starting out in the market to go big
straight out the gate. However, based on your probable lack of experience, and
knowledge, this is poor practice. It’s better to start out with far smaller,
and more frequent trades, to get a hang of both how the market shifts, and how
the user interface and trading infrastructure of how your particular broker
functions. This happens to be one of the biggest traps which beginners fall
into, and their big trades more often than not crash and burn magnificently.
Which in turn gives a lot of first time traders a ‘once bitten twice shy’
attitude, causing them to quit trading before recognizing their true potential
in the craft. So if you’re a beginner who aims to trade for a good amount of
time, it’s a smart move to smart with smaller trades, and work your way up to
the bigger ones.
Get a Feel for Timings
As a beginner, you have a basic to
intermediate understanding of how the market works. It’s a smart move to spend
your first few weeks making small investments (as mentioned in the above point)
and notice how the market tends to move, and for what reason. To the naked eye,
the market movements can seem sporadic and without reason, however, if one were
to truly take out the time and examine what, when, and how the market tends to
move, then they would be acquiring a valuable skill in the world of trading.
While not a completely scientific process, long time traders tend to get a
‘feel’ for how the market moves, which is simply an instinctive thought created
by years and years of trading. If you can garner even a 5-10% understanding of
market motions, it will reflect as a far more significant
Stick to your Goals
It’s very easy to get distracted
from our initial goal, especially in a dynamic and ever-changing environment
such as the share market. We’ve mentioned several times in our other pieces
that having a goal should be of paramount importance to traders, especially
beginners, as goalless or aimless trading can be extremely detrimental, and
yields extremely difficult times and stressful situations to deal with. The
issue is, as a trader, we are constantly surrounded by headlines, news pieces,
or TV pundits telling is where to put our money, and how. And generally, we as
beginners have a tendency to blindly follow experts or ‘the pack’ no matter how
big the discrepancy between their goals and ours are. Only make a trade if you
are extremely confident that it is in line with your overarching goal, if not,
don’t even consider it. It’s important to have a diverse portfolio no doubt,
but you can get to this aspect of trading once you’re a bit more experienced.
Making realistic forgiving trades which are in accordance with your goals
should be priority one for any young trader out there.
Make Grounded and Realistic Trades
Finally, we must discuss the fact
that beginners tend to glorify the possibilities they are presented with in the
market, and fantasize all the benefits they could reap if they make the right
trade at the right time. While this is by no means a shoddy attitude to have,
it’s important to not get carried away in these sentiments. While a particular
trade may seem extremely tempting, or may have enticing benefits, if it seems
unrealistic, chances are, it is. So do the smart thing, and try to bet a little
safer, bear in mind that it’s alright to make riskier and more rewarding trades
later on in your tenure of trading, but
towards the beginning, play it safe, and try not to be too much of a hotshot.
Should you implement these
strategies on a regular basis, with a consistent mindset to improve with every
single trade you make, then you’ll graduate the beginner level in no time, and
will be slinging trades left, right, and center. We as humans have a documented
propensity to believe that we’re better at particular things which we may not
be at all. So play it safe, try to get a better hang of concepts and movements,
and only make riskier trades when you believe that you’re truly ready for them.