Top 05 Things Every New Trader Must Know Before Getting Started
If you are starting out as a new trader, then you may find it difficult to understand and strategize as per market’s intricacies. As a trader or investor, you will experience highs and lows, speculating price movements, buy and sell signals and more.
So, before you get started with stock market trading, you must know the five important things below.
1.Start a solid foundation through education
To start day trading successfully, it is important that you should build a solid foundation of knowledge about how the financial markets work.
Traders need to actively educate themselves on everything from basic information like the trading hours and holidays of different exchanges, to more complex topics such as understanding how news events can impact prices, learning about margin requirements and the different types of instruments they are allowed to trade.
Without actively gaining this variety of knowledge, they will not have the understanding needed to interpret market movements and participate effectively.
2. Practice and Test Out Different Strategies
Beginner traders should start by actively testing out at least two established trading strategies to gain experience, choosing one as their primary approach and the other as a backup in case opportunities do not arise with the first strategy or it fails to generate profits.
They can then practice implementing these strategies by making practice trades and monitoring how effectively each performs over time.
As their skills develop, traders should be constantly evaluating the strategies to determine if any need adjusting to new market conditions, customizing to improve results, replacing with more successful alternatives, or abandoning altogether if they become unprofitable.
This allows novices to gain hands-on experience refining their strategies before risking real money.
3. Develop a Trading Plan
Day traders must proactively develop a clear, detailed trading plan that outlines their strategic approach to the markets. Within this plan, they must actively define the specific criteria they will use to identify and make trade selections, whether relying on technical indicators, fundamental analysis, or a blend of both.
Moreover, when preparing strategy, traders need to precisely specify the entry and exit tactics they will employ, the risk management techniques such as stop losses and position sizing they will follow to limit downside, and the rules for determining what proportion of their capital to allocate to each trade.
Having a well-planned, comprehensive trading strategy in place is essential for traders to actively manage their risk and consistently implement their approach in changing market conditions.
4. Establish a Risk Management Strategy
Limit your risk on each trade. No single trade will be more than 2% of our total portfolio. This limits our maximum loss to 2% per trade. Next, we will enter each trade with a clear plan to exit. For any stock purchase, we will place a stop loss order 2% below the entry price. This automatically sells the stock if it falls too far, cutting our loss at 2%.
Similarly, every trade will have a profit target set. We will identify a realistic target, say 5-10% above entry, and plan to sell at that price to lock in our gains. Following this strategy means we will never risk more than intended on any trade, and always have preset points to get out with either a small loss or a profit.
5. Follow Trading Analysis Platform
OiGenie allows us to analyze the market and trades effectively. It combines important technical indicators like EMA, VWAP, RSI and Supertrend with options data to help us identify the overall market trend and momentum.
Using this platform, we can backtest strategies on historical data to see how they would have performed.
Great tool to analyze option chain. I was not able to compare the participant activities in option chain tab of Fyers or in any other apps. OiGenie provides the best option chain analyzer, probably in the most easiest way possible. The app seems to be genuinely helping the traders to become profitable. I have made 3.86 lacs INR as highest profit in 1 day. You can signup to see it yourself.
Read moreThe easy to use option chain analyzer provides valuable information about option activities and participants.
Together, this technical and options data helps us determine the right strike price and assess risk for upcoming trades.
The goal is to maximize the probability of success. With OiGenie’s comprehensive yet simple tools, we can research the market, find high potential trades, and make well-informed decisions that may lead to better trading results.
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