It is fascinating to note certain things. These days it is the ordinary people who are much more interested in trading and investing procedures. This is because it is a great way to earn money. It is simple to do. It does not involve much struggle.
The reason:
The main reason why more and more people are getting in to this is because there are a number of people who want to be independent. They do not want to be under the financial assistance for long. It gives a sense of relief when we can take care of our own expenses. There are three essential things that are required to be done for this. They are:
1.The psychology involved:
This may be the hardest part of trading. It may be a different thing to be intelligent, but using them in a proper way to make gains is very important in this field. It is interesting to note that the investment part along with the trading part is considered to constitute about 90 percent by psychology. The rest would go to the strategies involved in investment and in the risk management. Mostly it is at this stage that people are bound to quit if they are not able to deal with the psychology that is involved in it. This is because in the process of investing the human emotions are not that supportive to us, as they would be normally. Few examples to show that our emotions have role to play here are:
We would hesitate to trade when our plan already ells us to do so.
We mostly end up overtrading.
We are too hesitant and take too long to trade.
We take up bad decisions when we have to think about taking the stop.
All these are very common in every place. But the only thing we need to understand is that emotions have a role to play,
2.Managing the risk:
Once you have invested, this becomes more important than the previous steps. If you take one wrong step here, you may end up losing the money you have invested. With a simple example you will understand better. In case you have 3 out of 5 to be the winning trades, with 60percent winning rate. But if you get 100 dollars for each win and lose 200 dollars for each loss, then you will end up with a loss of hundred dollars. Thus the risk management should be done properly.
3.Strategy to invest:
It would be the third important thing that you should bear in mind always. You should remember that though there are a number of chances out there, it would be wise to choose only those trades which would suit you. You need to determine which type you are. It can be done based on the following:
Needs
Goals
Investment horizon
Risk tolerance
by: Luke A. Hall
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2024-12-4 15:35
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