Beginner’s guide to start your trading journey…..
Even the greatest was once a beginner. Don’t be afraid to take that first step ~ Mohammad Ali
As a beginner in the stock market it is very easy to get overwhelmed with the things you need to learn to become a better trader. There are so many patterns, strategies and indicators that focusing on where to start and what is important can be difficult.
I also faced a similar situation in my initial days in the stock market. Now when I look back I realize that if I had found the right structure in the beginning itself, it would have taken less time and mistakes to achieve my goals.
I know that it is good to learn as much as possible but without planning results might not be as you expected. In today’s article, I would like to guide you through important steps to focus on as a beginner to get a better head start.
Find your trading style
The essence of strategy is choosing what not to do ~ Michael Porter
There are around 4–5 trading styles generally used by traders such as scalping, intraday, momentum, swing and positional trading. All of them have their own pros and cons and our focus as a beginner trader should be to select the right one as per our skillset. There are various factors which can determine your trading style such as time, capital required, personality, decision making and your goals.
Understanding your trading style in the beginning of your career helps you save time and also avoid unnecessary distraction in your learnings. I remember when I started my trading journey for the initial 6–8 months I tried almost every trading style. It didn’t really add value as more than focusing on excelling in one method I juggled between all, resulting in wasting a lot of time with loss making trades.
Give enough time:
Patience is not simply the ability to wait, it’s how we behave while we’re waiting ~ Joyce Meyer
I can’t emphasize enough on this point as trading is all about probabilities. When you are trying any new trading style, strategies or concept give it enough time to conclude if it’s working or not. For example: In my first year of trading one of the mistakes I made was not giving my strategies enough time. I used to learn one concept and would take a couple of trades, get frustrated and move to other trades.
Even the world’s most successful traders are not 100% accurate. There is a fair chance that out of 10 trades with the same strategy the first 5 would fail and later can give you good results but if you jump between strategies you will never know which strategy is your best strategy.
Focus on your emotions:
Emotions can get in the way or get you on the way ~ Mavis Mazhura
You might think that emotions are something we can easily control but the truth is it takes a lot of practice to have a sturdy mind. Trading gives you mixed emotions each and every day, it doesn’t matter if you are waiting for the trade or in the trade. You might experience different emotions such as fear, greed, excitement, thrill etc. and if you can’t keep calm you will end up making mistakes. I strongly recommend that you work on your emotions as much as you work on your strategies if not more, as without emotional control even with the great strategy you might end up with losing trades.
Follow a checklist:
Under conditions of complexity, not only are checklists a help, they are required for success. ~ Atul Gawande
There are various factors which affect trading and checklists play a huge role in ensuring that we follow the plan in the right manner. Checklist helps us plan our trade and execute it well. For instance I am a swing trader so I have two sets of checklists: Strategy checklist and Emotional checklist. Strategy checklist is something I use during non trading hours to plan my trade which helps me ensure that I don’t miss out on steps to find the right stock and during trading hours when I’m executing my trade I keep my emotional checklist handy so I avoid mistakes and execute my trade the way I planned.
Keep it Simple
Keep it simple, when you get too complex you forget the obvious ~ Al Mcguire
As a beginner you might be excited to implement all the strategies in your trading but it might not be such a good idea. It’s good to learn about many strategies and patterns to figure out which one suits you the most, however trying to utilize all the learning in a single strategy will affect your performance. For Instance If you are shortlisting stocks and to get a better result you would want all the indicators to show a positive sign you will end up having no stocks in your watchlist. It is important that you keep your charts clean and simple and work on figuring out which indicator works better in which strategy to get enough opportunities.
Analyse your trades:
Self assessment is the first step to all assessments ~ Anonymous
Once you follow all the above points it’s time to evaluate how the trade performed. How important planning the trade is, analysing it after the trade is equally important. It gives you lots of insights about what went right, what mistakes you should avoid and how you can improve in the future. This routine will bring patience and discipline in your trading which is the key to become a successful trader.
Backtesting:
History repeats itself ~ George Eliot
Last but not the least, backtesting is a very crucial part of trading. It is a process of figuring out the effective trading strategies by evaluating them with historical performance. One of the key principles of trading is “History repeats itself” that means things which have happened historically will repeat and to ensure that we don’t miss it we need to ensure to backtest our strategies before taking any trades.
To conclude, these are the points which I wish I knew when I started, hopefully it can guide you in planning your trades.
Thanks for reading!
