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Tips to become a successful trader – Know-how risk management and position sizing play a vital role

Tips to become a successful trader

Trading is considered an easy way of making fast bucks. Traders actively indulge in various verticals of the market to make profit employing multiple strategies. Trading seems a lucrative option to make easy money and that too quickly, but it comes with huge risk and ambiguity. With the availability of technology at fingertips, everyone aspires to become a trader and being your boss. It would be best if you had the qualities of an excellent trader to succeed in this business.

Why do most traders fail?

The primary reason for the failure of traders is jumping on the bandwagon without thinking. They are often lured by the vast profits and affluent lifestyles but forget the knowledge and hard work that goes behind it. Often the novice traders lack the skills, knowledge and risk appetite to be successful traders. Most of the times, their expectations are unrealistic, and they often lose their capital, chasing high profits or regaining lost wealth.

Qualities of a profitable trader

A profitable trader weighs the pros and cons of full-time trading before diving deep into it. It requires a thorough self- assessment to judge whether you should do it or not. Trading requires long working hours, continuous self-improvement and learning, risk-taking ability and endless commitment. It would be best if you had an in-depth understanding of markets, securities and underlying factors. You need to arrange enough capital and then devise a strategy and follow it properly to make gains.

Here are 8 tips you should follow to be a Successful Trader

  • Acquire sufficient knowledge about the stocks, futures, options, ETFs and Forex or any other segment you want to trade-in.
  • Arrange enough capital through which you can start trading. It should be sufficient enough to keep to going even if you face a streak of losses.
  • In-depth understanding of the market and how it functions is necessary to make profits in it.
  • Trading is a dynamic process, and you need to have at least two trading strategies up your sleeves to succeed in it. You can improve the strategy as you gain experience.
  • It would be best if you have made a plan to implement the strategy which includes per trade value, frequency of trades, underlying assets, entry and exit points, etc.
  • It would be best if you practice trading on test accounts before delving deep into it.
  • Knowledge of brokerage and other statutory charges is a must as they erode your profit.
  • Always learn from the market and analyze the trends rather than speculating.

Risk Management techniques for an active trader

Managing risk is an essential part of trading. You should always plan your trades and put well-calculated Stop-Loss and Take-Profit point. A profitable trader always does meticulous planning before executing the trade and knows their entry and exit points beforehand.

How to determine position size?

Position size is critical and is directly related to your risk appetite. You need to balance it correctly so that it is neither too less nor too much. You can fix a percentage of your total investment that you can put at risk per trade.

All these things play their part in making you a successful trader. Humility is an important virtue and patience is the key to success. Risk Management and Position Sizing go hand in hand to execute profitable trades. Most important of all, it is a continuous learning process, and you should go on self improving yourself to taste success.

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