1. Have a trading Method
Write down on paper, the reasons for entering the market, your plans for stop losses. If you do not have well thought out, coherent ideas for entries & exits then maybe you should stop all buying and selling until you develop a basis for your trading.
2. Back test your trading ideas.
Back-testing is the research which tells you exactly how an investment strategy and trading plan would have performed over a given historical period.
The reasoning goes like this: If it worked in the past, then there is a reasonable chance that it will work in the future.
Read about Back Testing here
Examples of Back Testing
(Both links open in new windows)
3. Stop Loss
Execute your stop losses ruthlessly, without any emotion. If your trading plan calls for a stop loss, apply it. Then forget about the loss.
4. Think like a Casino
When you enter a casino, does the management think you are going to provide their year's earnings ? No. There will be thousands like you, giving little bits to the casino. The casino earns money because of thousand sof visitors and could not care less if one of them made some money and went away.
In the same way, traders should not worry about one bad trade here or there. In your trading career, you are going to take thousands of trades, so do not get atatched to the success or failure of any one trade.
5. Accept that you will be wrong.
Are you looking for perfection in trading ? When you buy, do you wait and wait and wait to be proved right ? If you want perfect trades, then you are likely to ignore all warning signs that tell you otherwise.
Come on, we are all going to be wrong, more often than we like. Buit it makes no difference. The key is: our correct trades make more money than the losses in the wrong trades. That's enough.
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Sir,
I admire your knowledge. Whenever you come on CNBC, I become very attentive to all that you say.
Can you advise us on how to build portfolios. Earlier i was buying large cap stocks and made lots of profit. But then i discovered F &O through my friends and made lots of losses year after year. Everytime when i trade, i want to recoupe my old losses. But 7/10 times. I suffer more losses and it has become a vicious cycle.
For small traders like me who do small swing trades, Advice us on how we can trade on F&O successfully starting on how to select stocks for trading and how to plan our entry or exit strategies.
Most of the time - I just hold on to a trade (when we are suffering a loss). This hope that it stock will move up/down (depending on buy/short sell) has resulted in huge losses for me worth lakhs of rupees.
I agree with you F & O has become like gambling.
Thank you.
Advice us on how we can do successful F&O trades.
Respected Sir,
Myself A Chartered Accountant by profession from Ludhiana.I usually go through the suggestions or comments posted by ur goodself over this blog.It proved to be a booj for me as i have started learnig abt the displined trading.I just like the ideas of urs when u say that entry or exit from the trade is so important as we all take it so lightly.Really thanks for these worthy comments.
Sir, I have sent u a mail seeking ur guidance for any diploma in technical analysis which could be prove worthful form me or is there any classes organised by ur self soth that we can get the best one.
Kindly Suggest ,I would like to relocate to any location for this dioploma which could provide me the practical approach to leave a mark in this field.
Kindly Suggest...
Thanks and regards
Harish Baweja