7 Rules of Trading in the Stock Market:
Well, sometimes people have a loss in the stock market. Someone has a small loss, someone has a big loss. Well, I don’t want you to have a big loss at any time. And for that, you need to read the article till the end.
Because in this article today, I am going to give you seven golden rules of trading. Well, whatever I will tell you today if you trade, then you have to remember them all the time. I am going to teach you these seven rules and in fact, there will be many people who will have more experience than me and they will also tell you to follow these rules because by following these rules, your loss will be very limited and profit will be maximized.
- Don’t trade against the trend:
So the first rule is that you should never trade against the trend. Don’t trade against the trend. If you are going to trade, not against the trend. Now you know that the trend is up here, you know that there is a downtrend, you know that there is a sideways trend. Now you know the trend.
Now, what I mean to say here is that I will explain it to you in a little more detail. Let’s assume that the down trend is going on. Now the trend does not run like this. You know that when the trend is running, then you will see something like this.
The price of the stock goes up, goes down, goes up, goes down, and ultimately a trend line follows. So now when you see the trend going down, you are logged in to your stock broker account and have set your indicators. Now you see a signal like this, you see a candle, which you think will move from here. Now the stock will not go down more than this.
Now the breakout can happen from here. The trend can reverse from here. It may not have happened. You have traded and you have traded against the trend. I am telling you, this is my own experience. I don’t do this at all now. If the trend is in that direction, then you have to trade in that direction because the trend is your friend and if you trade against the trend,
you will have a loss. So in the starting, there are some trades that I have done against the trend and what happened, in most cases, there was a loss. So the trend, I think you should follow this rule. In today’s date, I consider the trend my friend and that is why profit-making has become easy. You have to understand that if you see the stock went down,
Then you saw it coming up a little bit, there was a candle or you saw an indicator that there was a crossover in MSED and anything happened, then the small things that are visible there, it may be right for you, but until the trend reversal is not visible on the chart, we will not trade. This is rule number one. Now you can tell me what you think about it.
- Always trade in the limit:
I will tell you the second rule. My words will sound a little harsh, but you have to remember that always trade in the limit. Every person has different limitations you see a profit of 5 lakhs, you see a profit of 2 lakhs, I have to do it too.
You have to do it in one day. Now, to make a profit of 2 lakhs in one day, a person was trading in 20 lots, but your limit was to trade in 2 lots, what did you do? You broke your savings a little bit, okay, you took more lot or people take loans too.
You are going out of your limit and you are going out of your limit, you could have traded in 2 lots, you traded in 20 lots. I will say it very clearly, you may make a profit, but you are going to lose all this money because you will not be mentally stable at all.
When our limit is, it is possible that I can afford a loss of 2 lakhs for me, it is possible that you cannot afford it, it is possible that I cannot afford a loss of 20 lakhs, someone can afford it. So everyone has different limitations. It is very important to identify your limitations here.
If someone, suppose, the loss of 2000 will not give you much trouble, it will not disturb you mentally. You can bear the loss of 2000, so you have to trade according to that. It is not that you saw someone trading, he was trading in 50 lots, I will also do it. I have invested all the money, and a lot of money will come. I do not know if that money will come or not, but I know that if you go out of your limit, then you will have a big loss that you will not be able to bear and then you are in the market.
- Never be in a hurry to trade
The third rule clearly tells you never to be in a hurry to trade. What do people do in a hurry? When they get time, let’s say they are in the office, they have got time for half an hour, one hour, they have to trade now.
It means half an hour, now they have to trade. You can see something, you can’t see anything, you can see something while trading. You are not seeing anything. You just open the stock, you are looking at the line chart, you are looking at the candlestick, you are just looking at what is being made.
But you don’t have to be in a hurry. Once you see a candlestick pattern, you see the price action, you are seeing that let’s say that the stock has broken the resistance, you are seeing it, along with that, an indicator is also telling you something, RSI is telling you something,
MACD is telling you something, and moving averages are telling you something. After seeing all this, when you are getting multiple confirmations to trade with patience, if you trade then you will earn money.
But if you only trade on feeling, you will trade on hurry, that you have to trade in an hour, what is important to do, if you have to do it, then trade in an hour, then do paper trade, you will find out how much accuracy you are getting.
Until you get multiple confirmations here, with patience, you can see that the market is open for you from 9.30 to 3.15 trading. If you have taken 3 to 4 good trades in the whole day, it is enough, you do not need to take 20 trades, you have to take time for 3 to 4 trades.
9.15 market doesn’t need to be open, I will still take the trade, not required, there is no hurry. If you are coming here in a hurry, then you will go in a hurry and if you trade with patience, then you will earn with patience. It is your choice what you to do. So this is rule number 3 golden rule that never trade in a hurry, there is no hurry.
If you want to make it your profession, then you have to bring patience. Now let’s move forward, but you don’t have to be in a hurry. Once you see a candlestick pattern, you are seeing the price action, you are seeing that let’s say that the stock has broken the resistance, you are seeing it, along with that, an indicator is also telling you something.
RSI is telling you something, MACD is telling you something, moving averages are telling you something. After seeing all this, when you are getting multiple confirmations to trade with patience, if you trade then you will earn money.
But if you only trade on feeling, you will trade on hurry, that you have to trade in an hour, what is important to do, if you have to do it, then trade in an hour, then do paper trade, you will find out how much accuracy you are getting.
Until you get multiple confirmations here, with patience, you can see that the market is open for you from 9.30 to 3.15 trading. If you have taken 3 to 4 good trades in the whole day, it is enough, you do not need to take 20 trades, you have to take time for 3 to 4 trades.
9.15 market doesn’t need to be open, I will still take the trade, not required, there is no hurry. If you are coming here in a hurry, then you will go in a hurry and if you trade with patience, then you will earn with patience. It is your choice what you have to do. So this is rule number 3 golden rule never trade in a hurry, there is no hurry. If you want to make it your profession, then you have to bring patience.
- Never average in the losing side.
This is very important that you will never average in the losing side. now what happens, people take trades this is for investors too. You have invested in a stock, you started investing when the share price was 100 rupees, now it is 70 rupees, now you have a loss, you bought another share, it was 100 rupees, now it is 150 rupees.
Do you know what people do, they sell this 150, book a profit. You have booked a profit and here where you saw that the share of 100 rupees is 70, now you will say that I will buy more, I will buy more, then my average will come, the average will come at 85,
Now my average is at 85, then what they see that the price has broken, it has become 60 rupees. Okay, let’s buy again, let’s average it, now let’s see, it has become 40 rupees and I can give you many such examples.
In fact, it is not that all the things that I am telling you, I am telling you from my experience, I have also made these mistakes and mistakes are made, so mistakes are learned The price we were looking at the share, the share that was running.
We sell it, so our running horse, we sold it and our lazy horse, we are feeding it chickpeas, you will run, you will win, the one who was going to win, we sold him, the horse sold and our lazy horse or the sick horse, we are telling him that you will win the race.
This does not happen. Ultimately, the company’s share is going up, it has many multiple reasons, you have to understand that there are many such shares that become multi-bagger, it can go up to 100, 150, 150, 500, so there is no limit to going up and when it comes down, the share of 100 can be of 10 rupees, so there is no limit to falling down.
- That never places a single trade.
Let’s talk about the fifth golden rule. I told you that never placed a single trade. I am not talking about investment. Here I am talking about trade. If you are trading, you are trading in options, you are doing intraday, you are doing futures. Do not place one order, place two orders. Now what does it mean to place two orders? We hear stop loss many times. Stop loss should be placed. Do you guys put it? Tell the truth.
You do not put it. You think that if it comes down, then there will be a stop loss. We will cut the deal. No problem, we will go out. Do you go out? No, we don’t go out. Because you think that when you see a loss, then our psychology changes.
We cannot bear loss. We think that no, he will recover from here again and we will recover our loss. You make a mistake here. Now let’s understand very easily. Let’s assume that you bought a call option and you bought that call option at a rate of ₹ 200. Now when you buy it,
What did you see on the chart? It is very important. Let’s assume that you saw a big hammer at the bottom of the chart. Now you saw the hammer, you immediately took entry. You also saw the next candle, which became Marubuzo. You saw Marubuzo being made.
Now you are getting a strong confirmation that the price can go very high from here. Now if you get a confirmation, you took entry after confirmation. You took it at its high. Let’s assume entry. Now what did you consider as stop loss? You also considered the stop loss of the previous candle as low. That my stop loss is there.
But did you place the order of stop loss? If you did not place the order of stop loss, then it is not necessary that every time what you see on the chart, it works in the same way. Anything can happen in the market. The price may go up a little bit from here and then come down and you do not have a big loss. It is possible that the trend at that time,
What happens now, you see that the hammer is made. The trend is giving a sign of reversal, but it doesn’t need to happen every time. It is possible that the trend reversal will not be as strong. That trend will continue and if you think that the trend can continue.
Then your stop loss order was not there. You can have a big loss. So it is always necessary to apply stop loss. That’s why don’t just place one order. Keep a stop-loss order with it so that you can avoid a big loss. We make a small profit and take a big loss.
There is a big loss on this. So what you have to do is you have to understand that your two trades should be executed. One trade you entered in, whether it was your options trading or you did it in intraday or you did it in futures, but it is necessary to have an order of stop loss with it. So this was rule number 5.
- Take your Profit or loss and shut the trade
The sixth golden rule is that once you take a profit or you lose, then in both scenarios, again our psychology changes. When we have a good profit, then people come in the stage of extreme confidence.
I am doing very well. You will feel confident from inside that today is a good day. I will take more trades and there will be a profit. Now if your confidence, and your psychology change, that is, some people say that your brother has made a profit. of 20,000 today.
Today we made a profit of this much. So at that time, your confidence is very good. It is a good thing, but even after that, if you take one more trade, then the profit you have booked will also go somewhere. If this has happened to anyone.
if you have a loss, then people come to a stage that it is a loss, no problem, we will trade again, we will recover our loss. Here again, the loss happened. After that, let’s do one more trade. Now if there was a profit, then we lost that too.
And if there is a loss, then the loss is happening again and again. So are we sitting all day? No, you have to understand the simple thing that this is a game of psychology. You do not just have to trade, you have life too. You may have your other work. You may trade in part-time, if you trade in full-time, you have your family, and you have to give it time.
Your mental well-being is very important. If you have a good profit, then it is a matter of the day. You took profit from the market and left. On that day, learn to enjoy the profit. If you have a loss, then do not come to this stage where I have to recover the loss today and leave.
I will not leave after making a loss. Then if you do not book a small loss, there is a saying, if you do not book a small loss, if you do not book a baby loss, you will face the mother of all losses.
If you have not learned to book a small loss, then the loss you have thought can be a bigger loss. So do not do this and if there is a loss, then it is not that I will recover this loss and get up today. Shut down, brother.
It is not the same every day. Sometimes Sachin Tendulkar also gets out at zero. So this means that whether you have a good profit or a good loss, a big loss, in both cases, you do not disturb your psychology.
- if there is a loss, then do not trade
Number seven is in the continuation that you just understood that if there is a loss, then do not trade for loss recovery. If you have a loss, you see that you have lost 10,000, now I will recover the loss in the market. I am telling you exactly, my friend and his relative were sitting together and trading. Trade happened and they lost 20,000-25,000 in trade.
They were trading with a good capital. I will tell you first that they had invested 7-8 lakhs rupees. So according to 7-8 lakhs rupees, a loss of 25,000 is not considered a big loss according to the percentage, but if you see a loss of 25,000,
Then what does psychology say? Once my friend said to his relative let’s book a loss of 25,000, that’s enough for today.