If you are completely new to markets and want to start making money from them by trading, look no further. This is your ultimate checklist for getting started in trading and making consistent profits.
Here are my 10 steps to getting started in trading!
* 2 is important. But 6 & 7 needs to be mastered to become consistently profitable!
1. Trading basics
Before putting your real money at risk, first learn the fundamentals of trading.
There is so much to learn about trading. But first, you should learn the basics needed to survive in the market.
This includes learning about :
Capital market basics,
Trading platforms comparisons,
How to read charts,
Difference between trading and investment,
Reality of trading etc.
*The fundamentals of trading apply to all markets in any country and can be applied to any asset.
2. Trading strategy
This is the most important part because this is where you are most likely to be scammed. Operators can easily sway you away if you don’t have a solid strategy.
People purchase calls from tip providers in the hope of profiting. However, they have no idea what strategy is being employed.
They are unsure whether the strategy will be profitable. Or if they have any at all.
As a result, they become easily frustrated with the markets and lose all of their money.
Creating a stock strategy does not have to be complicated. You simply need to develop criteria for :
1. Stock selection
3. Exit if you are wrong (Stop loss)
4. Exit if you are right (Target).
You can get a lot of ideas from traders online, or you can create your own strategy if you have mastered the fundamentals.
Also, keep in mind that no strategy is 100% accurate. So don’t waste your time looking for perfect strategies.
3. Paper trading
Don’t put all of your money in the live market right away after learning the fundamentals of trading and developing your own strategy.
Begin practising the strategies you’ve learned in a demo market and select one or two for the next step.
Here you will learn how the market works and what best suits you. You can trade on paper for a month or two.
You now have a few strategies that you have paper traded for some time.
All you have to do is backtest each strategy with historical data and record the results.
You can now select 1 best strategy based on win rate, drawdown, and other criteria that meet your requirements..
Backtesting can be done on platforms such as tradingview, zerodha streak, mt4, mt5, and others.
5. Journal it
Now, journal all of your backtested results and prepare your journal for live trades.
A trading journal is essential because you will have to figure out your mistakes on your own.
Even if you have a mentor, you will need this for their reference.
Journaling can be done on paper, in a notebook, on excel sheets, in project management apps such as notion, in dedicated apps, and so on.
6. Money & Risk management
This is the most crucial step if you do not want to lose your entire investment.
You can manage and protect your capital by following a few simple rules.
Simple rules such as how much you are willing to risk per trade, how much capital you use, and so on should be strictly followed.
Once you’ve determined your strategy’s win rate, drawdown, and so on, you can manage your money accordingly.
This will also determine how much capital you will require to trade.
Risk management rules such as the 1% rule can help you protect your capital.
7. Emotional management
This is the one skill you must have to survive in this market.
That is, in order to manage your risk, you will need to have strong emotional intelligence. While trading, you should keep your emotions in check.
As a result, controlling your emotions is the most important aspect of trading.
You can begin meditating, particularly meditation that involves controlling your mind for focus, as this will help you in your trading journey.
8. Trading plan
Now that you have everything in place, make a trading plan and keep it with you while trading.
Make a list of your strategy rules, as well as your money and risk management rules. This should be your trading guide. They must be strictly followed.
9. Open accounts
You are now ready to begin trading in live markets.
Look for trading platforms, brokerage firms, weigh their advantages and disadvantages, and learn how to use them.
Open a trading and demat account, and spend a day or two observing and learning how to execute trades.
10. Start trading with a small account
When everything is in place, you can begin trading in the live market.
However, start with a small capital to practise in live markets.
Determine whether you can survive in markets and act accordingly.
After a few months of consistent profit, you can increase your capital.
After completing these ten steps, you will have successfully progressed from a complete beginner to a trader.