How To Be A Successful Trader

Dec 4, 2020

In my first video, I spoke about my proprietary greed and fear index.

I would like to thank you for your kind words and feedback.

In this video, I will share my learnings from 15 years in the market.

I will tell you what separates the few successful traders from every other trader in the market.

Please keep an open mind while you watch the video.

And don't forget to share your feedback.

'Old school ho ya new school sabka syllabus me ek subject common hota hai, Profit?' Have you heard this is a dialogue in the movie Scam by Harshd Mehta?

Welcome to the Fast Profits Daily video series. I'm Brijesh Bhatia, Research Analyst. So in this video we will be discussing about the traders who are making profits. What other parameters one should look at while making profits out of trading.

So there are various respects of looking at trading, and I would request we have a playlist called Weekly Cash Alerts by Vijay Bhambwani. Do watch it. It will really help you to analyse how the markets are going on.

So coming onto the trading side, there are various suspects of trading one should look at. I'll name a couple or some of them and go in deep.

Know More: Which way are the markets & the mutual fund industry headed?

First is the trading style. So I have learned from most of the traders when I been discussing with them. Many of the traders are working as a professional and want to make money out of their savings and investments.

The key questions what I get when interacting with them is, I want to do intraday trading. I want to do short term trading. My first question to them is, do you have time out of your professional life to focus on intraday trading?

Intraday trading is not one minute momentum, you are taking a bet. It's not a one hour movement you're taking a bet. You meet to have time from 9 am to 3.30 pm. This is the market time. Apart from that, you need to have time on your studies. Coming onto the swing trading. Yes, you need to give time to that as well.

So a trading style. When I discuss with traders, everyone has their own trading style. The first thing is define your trading style. How much time you can devote to markets, devote to your studies for markets out of your professionalism, because defining the profession where your bread and butter is very much important and out of your savings you are taking a second avenue as a markets. So your first avenue of income is very much important when it comes to investing into the markets. So do you have time to do that? So you're trading style with time is very much important.

Second aspect is risk management. I have seen many people who want to do intraday trading, starting with Rs 5,000. Rs 5,000? What will you make? So there a difference between expectation and reality. If you are starting with Rs 5,000 and just believe that, just look at that many of working for one year, whole year and it's time for salary hike or your bonus, are you expecting a 100% rise in your salary? Are you expecting 200% rise? 300%?

It grows gradually with 10%, 15% depending on company to company. Similarly, investing and your trading is a part of your business avenue? Take it as in business avenue, not gambling.

You're investing Rs 5,000 and you are expecting a return of 50,000. 10X Some are expecting a return of around 15,000. That's still 3X. So 5,000, I would not suggest and even 50,000 if you're expecting a return of 3X is not an expectation you should come into the markets because take it as a business avenue.

Even if you are an entrepreneur, starting your own business, so within one year, withing two years your profits won't double or triple, okay? So every market has its own time, every business has its own time. So take this as a business avenue and just keep your expectations what you will earn from the markets.

Third, aspect is knowledge. There are various stuff when you look at knowledge. I take knowledge in two parts vertical knowledge and horizontal knowledge.

Horizontal knowledge you are learning each and every thing. You are learning fundamentals, you're learning technicals, you're learning derivatives, you are learning various stuff. Vertical knowledge plays a key role when you are moving on from horizontal to vertical.

So horizontal would be the first step for me, where I'm learning fundamentals, technicals, derivatives and after that vertical knowledge comes into play where you are entering deeply to the fundamentals, deeply into the technicals.

So fundamentally deeply, I would say, you are taking a bet on the company which is has a good order book, a company with lower PE, a company with good cash on their books, a company which is giving you consistent 5%, 10%, and 15% in their books.

Technicals, you move onto the basics of candlesticks. You move onto the trend lines, moving averages, Elliott waves.

So vertical knowledge plays an important role when you are doing any kind of business or coming into the market. So that the thin line difference between a successful trader and a trader who is making losses consistently. Knowledge plays an important role.

So believe me, all types of markets won't be for you. So I know some traders who just look for bearish sort of markets. When they think markets are peak and all their strategies are supporting on the short side, they will come into the market, do aggressive shorts, be silent for one year, but that one month of bearish markets they will earn for next 12 to 15 months.

Similarly, you have to define your strategy, and this will only come with the knowledge. After you have gained the knowledge the next part is defining the strategies. So there could be discretion of strategies where you think that okay, this set up has been going on, I'll take a bet. So that's a bias for your strategy.

Other part of your strategy would be systematic based. You've defined a strategy in a system. If your system says buy, you buy. If the system says sell, you sell. So that kind of systems you need to develop that kind of strategy, you need to develop and you would be successful.

So that kind of structure, a successful trader has, as I have interacted with most of them and believe me, when you jot down such points, pointers, and come with a proper strategy into the market, even if you have 5,000 or 10,000, you can make profits but don't come with the expectation that you can make 3X, 5X in one month, in one year. It is not possible. On a blue moon, yes, it can be but consistently it won't be and consistence plays a key role over here into the market.

Managing your risk consistently, making profits, exiting out of your losing trades, these are the smaller stuff one should keep in mind while entering into the market or any kind of business I would say.

So signing off and I hope this video will be very much helpful for many who are coming on to the trading plan and do comment in the comments section below on any kind of video you wish to have so that I can discuss on it.

Do not forget to like the video and subscribe to our Equitymaster channel. Signing off. Thank you.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

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