Key factors must be reviewed while trading in Financial Markets.
Recent situation of the distressed global financial markets dismayed the short-term investors and the individual. Many of them have their own story to tell on the severe punishment by the stock markets’ that they usually try to play without rechecking the basics and without any particular plan or risk assessment
Actually, lack of planning and risk management was not limited to individual investors only but every segment of the financial markets and even the Governments also had forgotten the need to assess the plans and risk management of the Financial and capital markets, the fact become quite clear after the sinking of the Big Investment bankers and its ripple effects shattered the financial markets worldwide. It is correct to say, that very basic reason of the current financial situation nearing recession is the lack of panning and risk assessment from the individuals and the authorities concerned.
Going forward with the topic of trading, below you will find the reviews and key points one must know while engaging in the field of trading.
Why you want to trade?
This is the first thing you must answer. There are different reasons for different people. For some it is for the fun or excitement and also the adrenaline rush comes from the trading in the multi-billions financial markets.
Certainly there are also full time professional traders also known as “Real-Time Traders”, those who trade with well-planned strategies with calculated risk taking abilities.
For some people trading is an escape form the world around them
The answer of the above question is and should be that’ you trade to make profits. Trading must be free from emotions and based on well-planned decisions, failure to make any profits is not an option to carry on with trading.
Timing - While day trading
Generally timings play a crucial role in a day trade, traders find out their own ways to time out the daily contracts.
Timings are based on the trading process, which includes’ taking positions in securities, evaluate the positions and exiting the positions.
Many Real-time traders usually consider the best time to trade in the market is ‘opening hour or two’ and also the last half-hour before closing, the momentum tends to be strong at these times, also the buying and selling pressure create a basic trend on these times. Successful traders make more by doing less with the help of timings.
Limited positions
Tomorrow is another day for us and also the markets, do not trade as there is no tomorrow, somehow if actually there is no tomorrow you should not waste your precious today on the stupidity of trading in the financial markets.
Limit your trades for the specific numbers of contracts you comfortably handle, let’s say three, four or so. The limited exposure on daily basis help traders to stay focused and act as a great tool for risk management, as the limited positions help trader to pass through the disastrous times of volatility and downfall, as we witness them lately.
Planning Trades
Trader must follow a well-built plan. Typically the trading plan consists of the steps to follow in the trading, basically three major steps of any trading plan are’ setting up the trading objective, when to enter in trade and when to exit.
As the first step of trading plan is setting up the trading objective, this must include the different eventualities like the market conditions, volatility, volume of trades, sentiment, action plan in the unexpected situation and many other events based on the information available.
Experienced traders live moment to moment, because they know from their experience that proper implementation is essential for their plans. New traders must write down their experiences as raw data to make their future trading plans. Recording personal experiences during trading hours help to review them in the off markets time and this provides the sound fundamentals to create your very own tailor-made plans
Trading without a solid plan is obviously speculation and probably sure short way to huge losses.
Calculate Your Risks
Risk calculation is also the part of trade planning but the concept is of utmost importance and need to be covered separately.
The percentage of money involved in trading depends on the surplus available and in my personal views trading percentage should not exceed the ten percent of the surplus. The very common mistake that rookie traders do is following the get rich phrase that ‘High risks and high returns’ but the fact is little different in the real world of stock trading, greed and panic are the most dangerous emotions always prevails in stock markets and the markets hardly obliges the emotion, excessive risky trades above potential, surely shattered the quick rich dreams one day and with a very harsh lesson that seems too late for any help. Many traders have broken down and have learned the lesson but for no use as they experienced the irrecoverable post-traumatic effects.
I do not find any sense to mention that you should not be involved and waste your hard earned money in all the hype of the magical systems that automatically make high percentage gains or tricks to make millions from stocks, forex or whatever. These simply do not exist. If those systems really have some worth’ why the developers of these systems wasting their time and the time of the army of affiliates to promote them? Also, why they are selling the billion dollars secrets for few dollars in the first place? Think about that before you make up your mind! The few genuine systems that exist are the financial models those represent the data in a simple formats that help investors to understand the conditions and help you spot potential market opportunities and implement your unique trading plan or strategy.
Remember that the risks always remain while trading but the calculated risks is the key to success, risk only a small amount on a single trade, keep you cool and stick to the basic plan you have made. Trust on your personal research and never change your plan in crucial hours of trading, if the need arises, stop trading for the other time as tomorrow brings another day to trade.
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