Basic knowledge/steps to enter in stock market

Many people think stock market is a gamble, which is not true. It’s a game of probabilities. As whatever the strategy you make there is no guarantee that it will work 100% of time. Based on my experience, out of 10 trades usually 6-7 trades work in case of bull market and 4-5 work in case of bear market. This is the reason risk management comes in place. Having said this if someone learn the fundamentals and technical analysis of the market and deal with proper risk management and discipline, then he can generate a return of 50%-100% p.a. or even more than that. Follow the following steps before entering in stock market:

Step 1. Take training or read books on Fundamental Analysis
Step 2. Take training or read on Technical Analysis
Step 3. Read books written by successful people in the market
Step 4. Analyze the strategy suits you and test your understanding by referring previous charts and fundamentals
Step 5. Put 10% of capital you want to invest in your DMAT at least for 6 months
Step6. Start trading with the capital by making note of followings
– The reason of buying
– The risk you are taking on trade i.e., Stop Loss
– The target point you are planning to sell
– The basis of target
– The basis of stop loss
– Put an image of chart at buying point and selling point
Step7. On a periodic interval of 15 days or 1 month, analyze your trade. Put a note of following during analyzing
– How much trades reached target points
– How much trades went against and booked loss
– Whether Stop loss and target points are respected in all cases
– How your stock performs compared to Index
– Which are the stocks performed well and why you could not capture the same
– What are the mistakes you have made
– How to plan for future trades
Step8. Read the books again and again and follow the above steps till you get a satisfactory result. As someone writes a book after he gets successful in any field and wants to deliver his/her knowledge for betterment of others. If you are not able to get the result, then you need reading and practice again and again.

Article By
CA Sudesh Agrawa

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