The Basics of Disciplined Trading
Published by Sharekhan Education | March 26, 2022
The Basics of Disciplined Trading
Behzad Elavia | Sharekhan Education
Without complicating things much, one can easily say most traders have a straightforward goal when they enter a trade: achieving profit in the shortest possible timespan. But that does not prevent the trader from using erratic, compulsive strategies, which often lead to agony and despair.
On the other hand, professional traders are composed, have a clear sense of risk management, and thus achieve consistent results. They work with a system programmed to avoid basic mistakes while trading. So with this piece, we thought: why not take you through a few basics that help you turn into a disciplined trader?
Avoid Random Trading
The hallmark sign of a novice trader is they fail to understand the quality of trade set-ups vis-a-vis a sound risk management process. Every trader should also learn the art of when NOT TO TRADE, keeping emotions in check and keeping their capital protected. Traders trading in derivatives with limited capital and a burning desire to acquire a fine reward should know of the financial risk they take on.
Money Management
A clever trader knows where and when they are willing to enter and exit the stock without holding onto emotions such as fear/greed. While it may sound elementary, it helps the trader maintain an effective strike rate while also balancing their own emotion as their portfolio brings in steady returns over time. It is observed that managing 2% of risk/trade helps strike the right mental and financial balance.
Stock Selection
Traders must acquaint themselves with the universal rule of trading – that no security that will 100% result in a profitable output. But even novice traders can maximize their chances by observing just three basics:
- Liquidity
- Volatility
- Trade with the trend
Trust your Research
A calculative and fixed return approach often results in rule-based trading. And to ensure further stability in managing a portfolio, one should monitor first-hand information of OI/volume-based trading activity data, news updates, economic/geopolitical developments, and so on.
There are probably a million ways to improve and live a better life as a trader. But if we want to keep things simple – the trader should stick to low-risk, high-reward and high-probability set-ups.
We at Sharekhan Education heavily emphasize the importance of disciplined trading. And for a 360-degree understanding of trading and investing, its concepts and its strategies, we highly recommend you go through our extensive courses and pick out the one that best caters to your needs!
By Enrolling yourself in this stock market course, a learner can learn the basics and the various aspects of trading in Futures and Options Trading.
