How Not To Lose Money In Stock Market ?
Published On: 05th July, 2019 | By: Sachin G. Kamte
This article explains the steps you need to follow while trading. The psychology of a trader, factors you need to consider before trading and how to place yourself to get maximum profits with minimum risk possible, especially in F&O.
Introduction:
If you are an investor who wants to make money in the stock market then read through completely.
This article will clear your mind and will teach you the discipline of a true trader.
This article is for those who lose money in the stock market even if you follow calls from different sources in the hope of making a profit.
Before going ahead let me give you a brief introduction about myself.
My name is Sachin G. Kamte and I have been trading from the past 16 years. Out of which I have experience in losing money for 12 years.
We have created this website so that the mistake I have done should not be repeated by you.
My principle is very simple, and you need to follow the same principle if you want to survive the stock market.
“Best trades are the ones where you don’t lose any money”
This means only one thing, any trade you execute should have the least risk possible.
Trade with low Profit and “NO LOSS” should be given more importance than trade with high “PROFIT” with a high chance of big loss.
The risk involved in any trade should be kept to a minimum.
Steps To Trade Successfully:
Follow these steps if you want to become a successful trader. You might wanna put some work into it but eventually, you will succeed.
1. Take calls from free sources. We at KnowMyStock pick calls from different sources across India.
Never pay for these calls as they don’t promise 100 % conversion.Analyst call always has a 50 % success rate.
2. Analyze the call and decide whether the call is right or wrong. This is very important.
Basic Analysis will help you decide the direction of stock and index movement.
If you learn this you will increase your success rate by at least 25%.
3. The third step is one of the main steps. If you don't know how to analyse the calls yourself, then we can help you with our trade setups.
Our Trade Setups can help you reduce losses if the stock doesn’t vary according to your calculation. This is what trading with the least risk possible means.
How to do it? It's via trade setups.
These trade setups will help you decrease risk by 75%.
For example:
Imagine you have funds to buy 2 lots of future.
One analyst will give you a tip, In which you will get ₹20,000 profit if target hits and ₹10,000 loss if the stop-loss is hit. These are calls with 0.5 risk to reward ratio with what we call medium risk.
Now if the stop-loss is hit you will lose ₹10,000. This for a small trader is very high on risk.
Instead, you are supposed to trade in such a way, where if the target is hit you will get ₹11,000 and if the stop-loss is hit you lose just ₹2,500.
Many times these trade setups help you make money even if the stock moves either way.
So trade setups are the perfect way to trade.
Securing your invested funds with the least risk possible is the way to trade. And trade setups can help you achieve that.
4. Decide the risk factor before executing.
5. One more very important step which you need to follow is save money wherever possible.
This method you might think it is not that important, but it is very important. Saving every penny is very important.
6. Read, Read and Read More: Read important books related to stock market and become an expert. Here is the link where we have listed down few books which helped us acheive the result.
Psychology Of A Trader:
Every trader/investor feels (Before taking a call) that the trade they take will end up in profit. Everyone feels it. But don’t take the necessary steps to assure that. They simply follow calls given by an analyst without proper analysis of their own and proper trade setup.
Do you feel the same? Do you follow analysts' call blindly? Do you go through losses no matter whom you follow?
Analysts and Brokers who provide calls may tell you they have an accuracy of 90%, 95%, 100% to many users just to make it attractive. Even for that matter an accuracy of 80% also is just too high. Never fall for it. It is just to manipulate and make money.
Always remember any call or tips from any analyst just has about 60% chance to hit the target. Especially in the short term. Even if you consider the trend, Volume, EMA lines, Fundamentals, and more data there is always just 60% chance to achieve the target given by an analyst.
For long term investment, all analysts are 100% accurate as in the long term most of the targets are generally achieved in a span of 2+ to 5 years’ time frame.
When you trade in the short term you have to be very careful and trade cautiously with the least risk possible.
Calls From Analysts:
Over 8000+ analysts and brokers give lots of tips and calls every day.
We collect the best tips (Both Premium and free) from different websites and apps across the web and provide it to you.
But never follow these calls blindly. Blindly following these calls is somewhat suicide.
If you execute any call given by an analyst without your thought, then there is a high chance of losing all your money and you will have no one to blame.
Has it ever happened to you, that you execute a tip given by an analyst and you lose a big chunk of your funds before you know it?
This is how even I lost lot of my funds first 12 years of my trading life.
Don’t do this mistake ever.
There is a way to trade successfully in stock market. The secret is never revealed by anyone in a way which you can understand.
Calculate this, an analyst tells you he has 80% accuracy and gives 100 calls a day. That means 20 calls fail to hit target. Imagine you take 10 calls and 7 out of these calls fall in failed category. Now tell me is accuracy important. As you would have got only 30% accuracy. That doesn’t mean the analyst is wrong.
Lesson to be learnt: Always take suggestions but take your own decisions. Accuracy is bullshit.
Important Things to Remember:
- It is always better to take calls with low-income low-risk calls than taking high-income high-risk calls.
- In trading always expect slow growth. Rapid growth never happens. If you take rapid growth calls you might end up losing all your money.
- Anyone promising high accuracy for the calls and tips they provide will not be true. And never pay for these types of calls.
- Trade setups can help you reduce risk drastically.
- Even though an analyst puts a lot of effort and study to give you a call (even from a well-known analyst). There is only 60% chance for conversion.
- Human error is always present in any analysis. No one can be 100% correct all the time.
Summary:
- Never pay for intraday tips and calls.
- Take trade setups to secure the funds invested in any stock or index.
- Save Money Wherever Possible.
- Read important books related to stock market and become an expert.
Happy and Safe Trading
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