A beginner's guide to trading - Chapter 3

In this chapter I am going to discuss about how new bie trader views the share market and the out come of it. After reading this my dear readers, write about your experience, so that it will help new people to avoid such costly mistakes. Mistakes are always costly here and beginners do that a lot. There two type of new bie traders. 1. Completely new to share market. 2. People who invest in stock market and willing to become traders.
Most people when they are just new to share market, view trading as their “solution to financial problems”.
Ex 1 : With 10,000 Rs I can make 20 to 30 thousand or at least double it per month.
Ex 2 : I can take 50,000 Rs from my savings and triple it in a month.
Ex 3 : I can borrow 20,000 Rs and earn for my monthly expenses.
Ok, now logical explanation. Can you do brain surgery to a patient since brain surgeons are making huge amount for a single operation? You cant, right? Because you need to be a brain surgeon and should have good experience in surgery.
So in trading, why do you expect you will rock the trading world without any proper education or practice or experience? Why share market should give money to an unskilful person? As a beginner you need to find out what type of trading suits you. Ex : Momentum trading, break out trading, trend following, scalping etc. Whatever capital you are using will be gone in few days or months without any knowledge about share market. After learning about technical jargons, you need to learn your emotions during trading. This process at least need 1 to 2 yrs depending on your stability in mind.
Investment is different from trading : People who have made good money in investment think, if I can make this much profit in few yrs, I can make much more if I do short term trading or intraday.
Investment, swing trade, short term trade and intraday are entirely different from each other and everything needs different skill set.
Investment/trading based on news : Newbie traders or investors when they don’t have any technical knowledge think they can trade/invest based on news.
In the above example the price tested the support before moving up even though the stock has good profit.
In the above chart price gave good volume break out when the news was positive.
1st stock has more profit compared to 2nd stock, but 2nd stock has good movement. So trading or investing based simply on news is not enough. Check the option data to understand what majority of traders are positioning in the stock.
In the above chart price broke the support and fall down even though the stock has good profit. It breaks the common belief that price will move up if it has positive news.
Trading without having any technical knowledge is gambling. Dont gamble with your hard earned money.
Great expectations without knowledge is dream. Good expectation with goal is a possibility.

Roles I play here : Author, Analyst & Moderator.

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