If you are looking for a way to make money or want to start trading, then this guide is a must read post for you. If you are just a beginner, then you must read this fully. Because I am going to cover a lot about successful trading.
Hello Everyone this is D Anand here. Welcome back to Moneybizpedia. Before we proceed further, I would like to request you, please subscribe to our newsletter and visit us regularly to learn more tips, methods to earn money, grow business and become expert in personal finance and investment. In Moneybizpedia we publish most relevant articles covering all the topics in the area of business, marketing, finance, tech, trading and investment.
So let’s dive into our topic now. What is the topic? Our topic is, ‘How to start trading?’ Right!
How to start trading ?
Trading is not a joke! It involves high potential risks and rewards. Therefore, you need to be very careful when you start trading. You have to learn so much of things related to it and develop trading skills. So, how can you start trading? Read the following steps very carefully.
Step One: Having Clear Mindset
Before we learn how to start trading, few important points I want to mention here which are very important for beginners. Before starting trading, you must have a clear mindset. What is mindset? Well! The mindset means:
- Prepare in your mind that you are going to start trading. You need to stay away from some stuff. You have to make yourself understand that you are not here to gamble.
- You are not here to make quick profit. Because quick profit is not possible.
- Prepare in your mind to accept that you cannot make regular income by just trading. Your income is irregular, and in fact you are going to loose some money.
Yes, this is the truth! The truth is trading can only give you irregular income, when you are a beginner to an intermediate as well. Only professionals can make an income that is very regular. Am I discouraging you to stop trading? No! I want to help you to have a clear mindset before start trading. So that your motives of trading will be a positive and that positive mindset only will make you a good trader in future.
So what I meant to tell you is that you can’t leave your job or studies or business and come to trade. When you are starting, you are reading this article or watching some body’s video. You have to understand that you need to invest time to learn and practice trading as a part-time along with your other jobs. And after learning for 1 to 2 years, you can think of making it a regular source of income. So it is very clear to you. You can’t come here for gambling, quick profits and regular income.
If you have set your mind, then OK. I am learning a skill like singing, becoming a DJ, or a dancer or anything professional. When you go for any kind of business, to learn that skill, even when you go for job, There is a training period first. So what is the training process during the training period? What is the mindset? His mindset would be to do what?
To get trained, to learn the process. But what happens here? There is a tricky point in trading. Look, everywhere you’ll get salary by the end of the month or week. Here, you’ll know by the end of the day what you earned and lost. Here, influence of money is a huge.
Do not focus on the money
So as a beginner, the first mindset you need to have is that you are a trainee . And when you come to learn, you need to focus on the process and not on the money. That is the biggest problem even expert traders face some of the time. They get too much influenced by the money.
They see Rs. 2 lakh and not that they would need to take a lot of risks or that the time has come to cut my trade. They hold on to their wrong trades too. Like recently, a great fall occurred on the market on Monday. Many people who take swing trade usually, they don’t place stop-loss. So when the market falls, they start holding it. So swing traders become investors. We shouldn’t do such mistakes.
Also read: What is Swing Trade? How to do Swing Trading?
Consider you are a trainee
The most important thing now you need to understand that you are here as a trainee. A trainee’s focus should be on process, on learning the skill and not on the money. But the problem is that because of money, all beginners get influenced. Like “let’s earn Rs 1000 for today man, let’s do this. We may have to break some rules but today, I’ll earn” and that’s where the problem is.
So I have told you, mindset should be of a trainee, not of someone who is here to make money. In the start only. So first point guys, I have covered to you. The first step to start trading is mindset. When the mindset is ready, let’s move on to the next point.
Step Two: Create Demat Account
Now the second point is, In order to execute training, you need to have a Demat account. What is a Demat account? You have heard of the company Kotak Mahindra Securities, ICICI Securities, SBI securities are also there, Motilal Oswal Zerodha, Upstox, Angel Broking, and numbers of brokers are there. So there are 2 kinds of brokers- one is discount brokers, the other one is full service brokers.
For beginners, I don’t suggest you to go with full service brokers because they charge quite a lot. It means that they’ll take some percentage from your transaction, around 10x more. Zerodha and Upstox- I use. I prefer these two brokers, where Zerodha charges Rs.20, Kotak charged Rs. 200. So I suggest you to open an account in Upstox directly.
You can also account in Zerodha. If you do intraday trading, then just Rs 500. Zerodha gives you 5x leverage. And currently all brokers give almost the same, SEBI brought a rule to remove leverage. So now it doesn’t matter at all.
Earlier it used to matter, when you buy using other expensive brokers, you get more leverage around 50x. Now everyone gives around the same- just 5x, they can’t give beyond that. So intraday trading and long term trading covered. I’ll cover this after this. So what did you understand? Open a Demat Account in Upstox or Zerodha, this is the first thing you need to do before starting trading.
That was a definite point, OK. So you have to open a broker account. To open the account, go to their official website Zerodha and Upstox.
Step Three: Create Watchlist
Now, let’s come to the third point. Now we have opened our Demat account and made the mindset. Now we need to decide to trade on what Buy which trade? To sell which trade? That is called making watchlist. Look at the screenshot how the watchlist made for you.
Do you see this watchlist? This is Good Volume Stocks. It’s written Nifty, Bank Nifty, Axis Bank, Bajaj Finance, BPCL, HDFC Bank, ICICI bank, Tata Motors, Reliance, SBI, TATA Steel, TCS, Titan, Zeel, Tech Mahindra, Ultra Tech Cement, Bharti Airtel, .
JSWS Steel, Indigo. I covered all the sectors for you. And all these are good volume stocks. You can’t trade beyond this. This is your universe, you made this watchlist.
Where did you make this watchlist? Do you see this tradingview.com? You can make this in Tradingview. So you’ll go into trading view and make your watchlist and you’ll be able to open charts.
So this is my watchlist giving to you. And yes, in this there are around 10-12 stocks, you will choose only 5 from these. One from bank, one from IT company, one from steel company, one from auto company. Like this you’ll make a watchlist on all five. It’s your universe You’ll do homework on these.
You’ll focus on the main five things, it’s not possible beyond that. So the third thing was to make a watchlist. You made your watchlist. Now, the fourth point is funding. Money.
Step Four: Practice with Paper Trading
If you want to fund your account, then how much should you fund? No, no, no! You just need to open your account, no need to fund any amount. Now, you need to do paper trading.
Now what is paper trading?
Paper trading means you don’t need to place real money. You have to apply real strategies, which I am about to tell you, in the charts. Look, one is back testing, you need to do that, to check. One is forward testing, when something is happening in real-time on market, then you whether your strategy works or not? Am I just fluking? To know this, you need to do forward testing.
Practice in paper trading from 1 to 3 months, spend only an hours a day. Try to learn the learn the chart as you practice with paper trading. In your paper trading, If you think SBI will go up, then you buy SBI. If you think it is going down then take a down trade.
Like when I write in copy that I bought SBI of Rs.5000 . And I’ll exit here at 2 pm, I bought them at 9 am, 9:30 am. So yes, I earned this lot of money. You’ll make a calculation. For that, there is even a software. Therefore, I told you to go directly to this website Tradingview. There you will learn everything. Of course, you won’t learn one thing from paper trading, that is psychology. But you will learn this when start trading with your real money.
Don’t worry! You will learn psychology in 1-3 months later. But obviously, instead of wasting you money, let’s do paper trading first. So I hope you understood the 4th step, what is paper trading. Now the 5th step.
Step Five: Funding Money to Account
The 5th step is the actual funding of the account. Now I have to do actual funding to my account. I have to put money to my account. So if we are about to do intraday trading, then put only Rs 10,000 to Rs 25,000 at start, not more than that. If we are doing swing trading, then we’ll put only Rs 1.5 lakh to Rs 5 lakh, not more than that.
Now you’ll say, what’s the difference between intraday and swing? What is intraday? In intraday, you start trading in the morning by 9:30 AM, and cut your positions somehow by 3pm, even if it is profit or loss. You don’t think at all that it’s a loss here. So I’ll hold it till tomorrow. And if tomorrow more loss happens? No. You decided that you are cutting the trade here today. So you cut this and that is called intraday trading.
There is a benefit in this, people with small capital, with Rs. 25000, your broker will give you 5x leverage. Consider this as an exchange. So Rs. 25000 will automatically become Rs.1,25000. Yes, by this you profit and loss will be 5x. So I’ll tell you how to do intraday in the coming article. So you understand what is intraday trading.
Also read: How to do Intraday Trading? Step by Step Guide
Now there is something called swing trading. Swing trading, positional trading, in which positions are help for longer than a single day. For 2 days, 4 days, 7 days, 10 days, 1 month, that is called swing trading. There are two kinds of trading and this uses a lot of capital. In this, we need to trade on a thing named Futures.
You must have heard of Futures and Options trading, we’ll talk about it at the end of this article. Now, the next point would be strategy, which is most important of all. Now, which strategy will we use? We will use our favorite intraday VWAP strategy, in this guide.
Step Six: Using Strategy for Trading
Read this very carefully. After learning this VWAP strategy you have to do paper trading and make your own concept, your own records, prepare yourself that before trying on real money, you try on this fake money. So you need to work on this strategy, and that’s it.
It looks kind of like this, my strategy which I’m giving to you, is like, if you see here, I have placed an indicator named Pivot Below, there is a Stochastic RSI. And a line named VWAP. Whenever price breaks a pivot and VWAP like this but it should break after 10:45. So after 10:45, we can see that we are already below. And somewhere here, the stock has stopped.
You can come here and drag one line from here, drop on here. When this line breaks, we need to short. Now beginners would ask what is called shorting? There are two type of trade guys- long and short. Buy for long, short for sell.
It means to sell without buying. Yes, maximum people in the market don’t know, we can earn money even in losing stocks. When we short here, then our second indicator is giving us sell. You’ll get to learn this strategy in detail. So here, we’ll make a short trade. Look at the screenshot below:
We’ll short here, we’ll keep our stoploss at our previous high and we’ll try to make a trade around 1:1.5 or 1:2 What is 1:2? If we face a loss of Rs 100, then we’ll earn Rs 200. Do you see 1:2? This strategy will give you 1:2 or 1:1.5. So like this, you need to learn this strategy.
Maybe beginners might feel it complicated, but it’s not that complicated. So we have chosen our strategy.
Step Seven: Risk Management
First paper trading, later real money. Alright guys, so next point. What is the next main point? The next point is risk management. What is this? It isn’t enough to just place strategies. Most important is learning to manage the risk. What is risk management? Look we have a tool called stoploss.
Stoploss is an automatic order which I decide. If I bought a share for Rs 100, and if this share starts falling below Rs 95, then bro remove me automatically. So that I don’t have to come and press the button to sell. It’ll automatically cut me off, it is called stoploss order. So you’ll use this tool, stoploss. So first risk management tool is stoploss. The second tool is Risk Per-trade or Risk-free Trade.
Use Risk-per Trade
It means the risk I am ready to take in a trade. If my account has Rs 1 lakh risk, can I take a risk of Rs 20000? Or of Rs 1000? Or Rs 2000? Or Rs 5000? So it is something which we have to define ourselves. If we read books, it’s written not to spend more than 1%, but that is for people having million-dollars account or 100 dollars, that is Rs.7000000- Rs.8000000, having 1 crore from your small account, Rs 1 lakh, Rs 50000, Rs 10000, Rs 2 lakh, Rs 5 lakh. So our risk depends on each individual 2% to 5% for 2%-5%, you yourself can decide if my account size is Rs 25000.
Then I don’t want to lose more than Rs 1000- That is 4%. I don’t want to lose more than 4%. So 1% of Rs 25000 is Rs 250 multiplied by 4 Rs 1000. So I won’t make a loss more than 4%. So how is it possible? It is possible.
If you took 100 share of Rs 100, OK? Let’s say you have Rs 10 stoploss. Let’s say you took some share of any amount Rs.10 stoploss is coming. So you will do 10×100 so it is Rs.1000. So you won’t buy more than 100 shares. If you buy 200 shares, then you’ll have Rs.2000 loss, its stoploss is Rs 10.
So multiply stoploss with quantity. Quantity means the number of shares. Otherwise, I have told you, made you understand. Never make a loss from your account more than 2% to 5%. Otherwise, you won’t be able to work long-term. And habit is the most important of all, so work on your habit.
Additional Bonus Tips For You
It’s very important. So that is risk management. Now the next main keyword, the main topic that is psychology. Psychology means our way of thinking. When something happens to us let it be good or bad, was it good or bad for us? How do we define that? That is told to you by your psychology. You need to have a winning psychology, not a losing psychology. Not a loser psychology.
What is a loser psychology? Loser psychology is “I’ll earn in all the trades” This is not possible. If you make your psychology positive, look I came to trade and not to my father’s casino where I’ll earn every time I play. It’s not like that, it won’t happen that way as you trade. There are always unknown factors that may come and damage your trade. So never be too confident on any trade that you put all your money on that. It’ll be either a big profit or big loss.
You shouldn’t do it like that. I told you step number one mindset, it’s not gambling. It’s a trading. It’s a professional thing. So you have to create a psychology that not all the trades that I am taking will be winners. So there will be some losses for sure. So whenever a loss happens, I’ll consider it as a part of the process and part of the game. That is my cost of doing business. Like if I open a store, then I have to pay electricity bills, I have to give salary to my employee, I need to buy raw materials.
Whichever office I open, I have to pay the electricity bill, give rent, pay my employees. I can’t say to the electricity board that I won’t pay the bill, they’ll cut the electricity. I can’t tell the internet guys that I won’t pay the Reliance Jio bill, the internet will close.
So that’s the thing, whenever a loss occurs, you should have the psychology that it is a part of the process. I’m considering it as an expense because a business’s turnover is not equal to profit. Turnover – expense = profit. But in trading, people think profit is profit. No, the profit is turnover, Loss is expense. What’s left is profit. People don’t know that. So this is the psychology you need to adapt guys.
Whenever you face a loss, never be sad due to fear. Just keep doing it by understanding that this was the expense. What’s left is profit. Like this, you have to make your profitability. So I hope I gave you the whole journey from mindset to psychology. From start to this.
Now, a bonus part for all of you, One of the things that the beginners might have heard a lot is Options trading Futures and Options trading. What is it? Futures trading and Options trading is a word.
Futures trading take quite a lot of money, around Rs 1.5 lakh- Rs 2 lakh for 1 lot average. So, Rs 1.5 lakh- Rs 2 lakh, what happens in that is In that also- actually earlier with used to say that we might face a great loss because we get more margin in that. But now margin has reduced even in that.
So Futures trading is not that risky now. But Options trading- Where it takes Rs 15 lakh to buy options, option comes in Rs 5000-Rs 6000 out of the money.
What is option? It is a way of trading You might have heard of this name- Nifty and Bank Nifty trading is not normally possible. It is possible only through Option or Futures. So they don’t do Futures, they do Options They get one lot for Rs 10000, Rs 5000, Rs 6000 in Nifty, for Rs 15000.
So out of greed, what do people do? They instantly trade in Options mostly due to other people’s tip. But you not do that.
Options trading will make you sink, why? Because Option trading is an expert level thing of all. If you have to do something, how do you start it? Beginner, intermediate, advanced It takes time, right? So option trading guys, can only be done by someone who buys and sells options for 3-4 years in the market. They need some experience.
If you are reading this article on how to start trading, then definitely options trading is not for you. So you need to stay away from this. But if you still want to Option trading, then you must learn in detail what option trading.
Few Recommended Topics to Read this:
- How to Be Successful on Olymp Trade?
- How to Start Trading in Olymp Trade? 90% Trade Profit
- What is Option Trading? How to do Option Trading?
If you want to make a career on Futures and Option trading, If you want to gamble, then do Options trading. At first, Buy Nifty and Bank nifty’s put when you don’t know. If you go up, buy put it if you go down, buy call. If it was that simple, then anyone could do it. But it’s not that simple.
So that is the most important thing that I told you guys. If you found this article so useful please share it with others. Or if you think more thing must added or new topic must posted please write comment below.