DO NOT CONVERT INTRADAY
INTO BTST OR SWING TRADE
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ONE OF MY FRIENDS BOUGHT 100 STOCKS OF YES BANK AT THE RATE OF $300 IN INTRADAY TRADE. UNFORTUNATELY, THE STOCK DECLINED THAT DAY AND CLOSED AT $288. HE DID NOT HAVE THE COURAGE TO BOOK A LOSS OF $1200 AND CHANGED OVER FROM INTRADAY TO SWING TRADE. HE TOOK DELIVERY OF THE STOCKS. LATER, THE STOCK WENT DOWN FURTHER AND CAME TO THE LEVEL OF $180 AND HE CHANGED OVER TO LONG TRADE INVESTOR. THUS, HIS TRADE GOT CONVERTED TO LONG-TERM INVESTMENT THAT IS NOT GENERATING ANY INCOME. HE IS JUST WAITING FOR THE STOCK TO MOVE UP.
HENCE, YOU NEED TO FIRST OF ALL DECIDE THE PERIOD FOR WHICH YOU ARE GOING TO TRADE. AND THEN, YOU MUST STICK T YOUR DECISION. FOR EXAMPLE, IF YOU HAVE BOUGHT ANY STOCK FOR A PERIOD OF ONE YEAR, YOU SHOULD NOT KEEP CHECKING ITS MARKET PRICE ON DAILY BASIS AND DO NOT THINK OF EXISTING AS AND WHEN STOCK SHOWS SIGN OF DECLINE.
INFACT, INDISCIPLINE IS THE MAIN CAUSE OF FAILURE IN STOCK MARKET. YOU SHOULD TRY TO TOUGHEN YOUR WILL POWER. YOU NEED PRACTICE FOR THE SAME . YOU SHOULD BE CAREFUL NOT TO FREQUENTLY CHANGE YOUR DECISION EVEN IN YOUR DAILY LIFE. AS FAR AS POSSIBLE, BE FIRM ON YOUR DECISION. THIS WOULD HELP YOU STRENGHEN YOUR WILL POWER AND YOU WOULD BE ABLE TO BECOME A SUCCESSFUL TRADER EVEN IN THE STOCK MARKET BECAUSE OF YOUR STONG WILL POWER, ELSE, THE STOCK MARKET NEVER FORGIVES THOSE WHO KEEP ON CHANGING DECISION AND STRATEGY FREQUENTLY.
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KEEP YOUR GREED AND FEAR UNDER CONTROL
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AN ENGLISH TRADER HAS WRITTN IN HIS BOOK THAT A HUMAN IS BY NATURE AN UNSUCCESSFUL TRADER AS GREED AND FEAR ARE HIS NATURAL INSTINCTS.
HENCE, JUST AS A TRAINING IN ARMY MAKES A PERSON A SOLDIER, A STUDY AND TRAINING IN SCIENCE CREATES A SCIENTIST, TRADING IN STOCK MARKET IS ALSO AN ART THAT CAN BE LEART ONLY WITH CONSTANT PRACTICE AND CONTROL AN EMOTIONS.
IN FACT, GREED AND FEAR ARE TWO SUCH EMOTIONS THAT MAY TURN YOU INTO AN UNSUCCESSFUL TRADER. LET'S SEE HOW?
WHEN YOU ARE IN A PROFITABLE TRADE POSITION, YOU MAY GET CONSUMED WITH THE DESIRE FOR MORE PROFIT, BUT SUDDENLY THE PROFIT STARTS GETTING WIPED OUT. YOU THEN CONSIDER IT RIGHT TO WAIF FOR SOME MORE TIME, BUT THE PROFIT GETS WIPED OUT TOO FAST AND YOUR PROFIT-MAKING POSITION TURNS INTO LOSS. YOU ARE STILL UNDER GREED AND DECIDE NOT TO APPLY STOP-LOSS. THE TRADE FINALLY TURNS INTO A SIZEABLE LOSS.
WHEN YOU TAKE A TRADE POSITION NEXT TIME, THE MOTION OF FEAR OVERTAKES YOU. THE MOMENT YOU FIND THE POSITION MAKING A SMALL PROFIT, YOU DECIDE TO BOOK THE SAME, AS YOU FEAR THAT EVEN THAT SMALL PROFIT WOULD GET WIPPED OUT.
POSSIBLY, THAT TRADE COULD HAVE GIVEN YOU A MUCH BETTER PROFIT.
IT WAS FOR THE PURPOSE OF TEACHING YOU HOW TO CONTROL THESE VERY EMOTIONS THAT YOU WERE ADVICED IN PREVIOUS TIPS TO KEEP A TARGET PF 1 % FOR PROFIT AND APPLY STOP-LOSS OF 1/2 % FOR YOUR TRADES.
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WHEN YOU ARE BLE TO TAKE YOURSELF TO A WINNING POSITION DURING THE DAY, YOU MAY RAISE YOUR PROFIT TARGET AND STOP-LOSS. ASSUME THAT YOU ENTER INTO TRADES OF $ 10,000 EACH AND KEEP A TARGET OF $100 FOR PROFIT AND $50 FOR LOSS. FORTUNATELY, OUT OF YOUR FIRST 7 TRADES, 5 TRADES ARE SUCCESSFUL AND YOU MAKE $500 FROM THEM AND YOU LOSS $100 FROM THE OTHER 2 TRADES. YOU ARE, THUS, HAVING A NET PROFIT OF $400, IN SUCH A CASE, EVEN IF YOU TAKE FRESH POSITIONS WITH HIGHER PROFIT TARGET OF 2 % AND STOP-LOSS OF 1 % THERE IS NO CHANCE OF YOUR MAKING LOSS AT THE END.
THUS, IN GENRAL, KEEP CONTOL IN YOUR GREED AND FEAR AND MAINTAIN A RATIO OF 2:1 BETWEEN PROFIT AND STOP-LOSS INITIALLY, TRADE WITH LOW PROFIT TARGETS AND STIL LOWER STOP-LOSS. ONCE YOU HAVE MADE GOOD PROFIT, YOU MAY GRADUALLY ENHANCE YOUR PROFIT TARGET AND STOP-LOSS FOR THAT DAY IN SUCH A WAY THAT BY THE END OF THE DAY, YOU DO NOT END UP WIPING OUT YOUR ENTIRE PROFIT OF THE DAY.
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