5 Steps To Be A Good Trader

5 Steps To Be A Good Trader
5 Steps To Be A Good Trader

If there is one job where you can be your own boss, that has to be trading. And when we talk about it, a trade can be of any form – including goods, services, and stocks. Today, in this article, we shall be talking about trading in shares, and the five steps that will make you a good trader.

While most of us have full-time jobs or our own businesses at hand to earn our livelihood, a few people have carved out a different way for themselves. They are full-time traders, and they are happy about it. It is because they are independent, working for themselves; they set their own goals, and choose their own working schedule.

If you also always dream of becoming a good trader, here are the five steps that you should know:

5 Steps To Be A Good Trader
5 Steps To Be A Good Trader

1. Understand The Basics

Trading in shares is a high-risk play-area, that can either make you rich or leave you bankrupt. If you have no idea about how trading works, you will more often fail than not, and lose all your bets for nothing.

If you have some basic knowledge about trading and you know what you are going to do, the chances of becoming successful increase multifold, as compared to playing a blind-bet. So, it is always advisable to understand the basics of trading – including the typicals like the rules of stock markets, the concept of trading, the meaning of basic terms like equities, bonds, risk, returns, margins, etc., before getting into investing.

 

2. Understand Yourself

Everyone has a different financial position, and so everyone can afford to take different amounts of risks. So, before you get started, it is crucial to understand your financial condition and ask the right questions to yourself.

As we all know, trading in stocks is a risky affair, and so you should be very clear about why do you want to trade, what will be your starting capital, what financial risks are you willing to take, which markets you wish to trade in, what is your target, and how soon do you aim to achieve your goal, etc.

Once you have an understanding of all this, you can go ahead and take calculated risks. Remember our bonus tip – to always start small and go big gradually.

 

3. The Trading Style

Once you are sure that you are good to go, its now time to decide on the trading style. There are two main types of trading – swing trading and day trading.

Swing trading is when you cannot invest a lot of time in front of the computers, and you want to analyze the graphs – may be over a weekend or in the evenings. It is all about following short trends. Next is day trading, which focuses on price movements during the trading day. These positions are kept open longer than one day, and it requires a high degree of concentration from your end.

 

4. Good Trader Creates A Trading Plan

If you want to make consistent profits, you should have a fixed trading plan in place that covers the technical and fundamental analysis, risk (capital at risk, risk per trade, etc.), and markets (the markets or product types that you want to trade).

However, one should understand that creating a trading plan is not an easy task at all. It takes some experience. You will develop this expertise only after a few months or sometimes even a couple of years.

5 Steps To Be A Good Trader
5 Steps To Be A Good Trader

5. Good Trader Sets Achievable Goals

If you have decided to get into trading, it is important to set goals. And more important than that is to set achievable goals. If you plan to crack a fortune within a short span of time, you should realize that it is good to hear and tough to achieve.

So, we suggest you set achievable goals and work on achieving them. As we have mentioned earlier, you should always start small, and as you gain experience and exposure in the market, you gain confidence, and then you can go after your bigger goals.

Summing It Up

Trading is a lucrative business with a lot of risk in it. However, if you think that you can crack it and be successful, it is essential first to have the basic knowledge of how trading works, how much amount you are ready to risk, what trading style you want to adopt, and how you would like to take this approach.

Once you have answers for all these questions, you must set realistic goals that you think you can achieve when you get started. Next, start with a small amount accounting for calculated risk and gradually grow big with experience.