A Simple Guide to the Stock Market

Traders often make the mistake of ignoring the different phases of the market. This proves to be a costly affair resulting in a loss. Traders think that they are smart enough to beat the market. This mindset is very dangerous. This is the precise reason for losing capital in the market. Trading in stocks is like fighting a war. The most important thing is to protect the precious capital. Often, a trader makes the mistake of using the wrong indicator at a wrong time.

Trading in the stocks requires a flexible mindset. A successful trader is quick to switch his positions as per the mood of the market. It happens that the market may be in a bull phase, yet it is going down. A smart trader respects the market by exiting his positions when the market goes against him. He never tries to outsmart the market by averaging his positions. The reason for people losing in trading the stock is that they find themselves in the grip of their egos. They are unable to accept the fact that they are wrong.

A successful trader looks for cues in the market. A market has a language of its own. It is advisable to keep out of trade if the market is confusing. There is no point in timing the market when the conditions are not ripe for trading. There are times when a trader finds himself on the wrong footing. The trend suddenly turns against him in this scenario it is best to reduce the position and keep out of the market.

The inability to book profit is another reason for failures in the trading of stocks. A trader must take his profits regardless of the stance of the market. A trader never knows when the market might turn against him. The vast majority of the traders wait for super normal profits. This mindset is the biggest enemy of a trader. This kind of risk can be taken only if there is an adequate accumulation of profits from the previous trades. There are some traders who book their profits too early. This is also a mistake. A trader must allow the market to give him the cues rather than acting on a hunch.

A trader must remember that trading stock is an expensive proposition. The stock market is not a place for excitement or thrill. An emotional trading is the sure shot way to bankruptcy.