Trading in the stock market can quickly get overwhelming for both beginners and experts alike. If you’re just starting out on your trading journey, you might have more questions than answers. You’ll also have to deal with fast-paced market movements and keep track of tons of variables thrown into the mix.
In such a volatile scenario, how do you ensure that your trades are successful? Well, that’s quite simple. All you need to do is follow tried and tested trading strategies based on your financial requirements.
Read on to find out more about some of the trading strategies that beginners like you could put to good use.
Strategy 1: Set price targets
This is one of those trading strategies that are helpful for both novices and share trading experts. It essentially requires that whenever you enter into a trade, you must ensure that you set a target for the share price in advance and adhere to it.
It is advisable to set both profit targets as well as stop-loss targets before going into a trade. This way, you can effectively limit your potential losses and prevent yourself from getting too optimistic.
Strategy 2: Adopt a buy and hold approach, if needed
When it comes to share trading, buying and holding may sometimes be the best strategy that you can employ. The stock market can often test your nerves. So, trading requires patience, lots of it. Most beginners tend to think that trading everyday is the way to experience success. But that’s far from the truth.
Successful stock market traders don’t trade all day, every day. Instead, they patiently look out for opportunities that meet their trading strategies and only sell their holdings when they need to. Your decisions should always be based on your strategy and logic, and never on impulsive decisions.
Strategy 3: Start slow and start small
As someone who is new to the world of share trading, you should always take your time and choose your stocks. It is a good idea to limit your watchlist to just one or two scrips. This gives you ample time to focus on trading opportunities pertaining to those stocks.
In addition to this, always start with a small amount of investment. This way, you not only minimize the risk of capital erosion, but also get to learn the ropes of trading better.
Strategy 4: Set aside funds and budget wisely
Allocation of investment capital is another one of the most important trading strategies that a beginner should be aware of. Set aside funds for share trading and ensure that the capital comes from your surplus funds.
Always invest only the amount of capital that you can afford to lose. Also, when going into a trade, it is a wise idea to just invest a fraction of your entire capital. This way, you won’t end up putting your entire investment at risk.
Strategy 5: Trade with a good risk to reward ratio
This is another important lesson that most beginners tend to gloss over when trading in the stock market. When you’re starting your trading journey, it is always advisable to trade in low-risk opportunities rather than going for high-risk-high-reward trades.
Low-risk trades combined with proper stop-loss targets have the potential to give you successful trades. They also allow you to come out of bad trades relatively unscathed. You could always take up high-risk-high-reward trades once you gain enough experience.
Strategy 6: Adopt a systematic trading strategy
Nothing prevents you from attaining success in share trading like impulsive behavior and lack of discipline. Once you’re done setting up your trading strategies, it’s extremely important to stick to them.
That way, you can prevent emotions like fear from taking over your trades. If you’re finding it difficult to inculcate discipline while trading in the stock market, you could always enlist the help of a Systematic Investment Plan (SIP).
Strategy 7: Time your trades
It is a good idea for beginners to refrain from trading during the opening hours of the stock market. This is because the market is generally extremely volatile during the first half-hour of the market opening.
The price volatility generally tends to go down as the day progresses, with the middle of the trading day being the least volatile. Therefore, for beginners, it’s a smart idea to just read the market movements instead of trading during the opening hours.
Implementing these trading strategies can help you significantly transform the way you trade. Remember, always be realistic about your trades, don’t give into emotions, and look out for the right trading opportunities. As you gain more experience, you can learn to implement other advanced strategies.