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Basics of Becoming a Smart Trader

In the financial markets a smart trader is the one who makes profit irrespective of market trends. Such trader also absorbs losses when there is deep plunge in the market. There is an advantage of outperforming other investors when you keep your emotions in check. This self-control help even in circumstances  when everyone else around you is biting nails in fear of losing money.

Why Smart Trader Outperforms?

It is almost impossible for bad traders, who are prone to making wrong decisions, to behave smartly, because their lack of knowledge, analysis and confidence negatively impact outcome of their stock trading.

It’s a catch 22 situation when market fluctuate. Bad traders do not invest smartly because they are trading based on their own opinions rather than quantifiable irrefutable facts. It becomes hard for them to have faith in their trading abilities when they have no insights on real trading system. A trader needs support and planned structure to feel confident.

While a smart trader relies on risk management method. This is method is developed based on a detailed trading strategy, writing an investment plan, analysis and implementing the readings in quick risk-free manner.

A trader can become smart investor if he gains the peace of mind. The thought process becomes sharp, this is necessary to give him an edge in the markets.

Most studies done in Indian stock market put the survival rate of traders at about 10% to 12%.

What are they doing wrong not to become Smart Trader?

Some factors are listed below:

  • Trading with actual money before gaining knowledge about the stocks
  • Trading with too big investment in seeing surge in the market
  • Taking too much risk at one time investment
  • Not having adequate money to trade effectively
  • Relying on predictions than committing to immediate reactions on actual market conditions
  • Wanting to get make money in greed to get rich
  • The inability to stay calm and wait – a trader should strive to be patient and trade in the moment.
  • Not waiting to trade on a quantified system with a written plan
  • They lack basic traits – stay calm, trade small, and building account safely over time

What a Bad Trader Should Do to Become Smart Trader?

If you are not making profit regularly in the market then you should develop some skills that help you in becoming smart investor.

  1. Don’t stress yourself, take time to coffer up money than making loss by trading with a small account that fails to manage commission costs and slippage
  2. You start trading calmly with the price action that is happening and not on the predictions, usually ignoring what you want to happen
  3. Develop risk management strategy, so prefer the call option of contract options to get rich over time instead of going broke quickly because of unreliable risk management techniques
  4. the biggest hindrance to your success in Indian stock market is your own fear, greed, ego, and opinions.
  5. Develop an ability to trade calmly by following your own customised system over time.