How to make a career in the stock market as a trader?

By Mr Anish Singh Thakur, CEO, Booming Bulls Academy

The internet has changed the way investment was perceived or conducted, especially by retail investors. Over time, the paradigm shift brought by the technology to the stock market has made  the availability of information easy. Traditionally, knowledge of investment/trading was limited to a few but now anyone with a smartphone can learn about trading and participate in it as well. In the past few years, India has witnessed an exponential rise in the number of people participating in stock market investments. Especially with the outbreak of the pandemic, people found an alternative source of income in the stock market.

Gen Z and millennials from Tier 2, Tier 3 and beyond cities have taken to stock trading using mobile apps. Considering that the young generation is actively becoming part of the stock market, it has to be acknowledged that they need enough knowledge at their disposal about the same. But even with all the available information at your disposal, how can you make a career in the stock market as a trader? Well, there are certain aspects, if kept in mind, that can pave a way for a successful journey in stock market trading.

Firstly, stop gambling! If you are not doing your research before investing/trading, you are just gambling. Investing/trading without research would only turn out to be a nightmare for you if your goal is making a quick buck. You cannot invest without understanding the important concepts of the stock market. Nowadays, there are several mediums like electronic media, print media, digital media, etc. offering market tips. While these are good options to shortlist your trades, you cannot completely rely on them for trading. Furthermore, do not mirror your decisions. Just because something worked for the other person, doesn’t mean it will work for you too. It is important to educate yourself about the stock market before venturing into it.

The next step is to learn stock chart technical analysis. Technical analysis is a process where future price movements are forecasted based on the past price movements in the stock chart. The process helps investors/traders to make the final call whether to buy, hold or sell the stocks. While the technical analysis may not make accurate predictions every time, it helps anticipate the future and make a more sound investment decision. Technical analysis helps traders identify instability in the stock prices, stock’s ability and value, price fluctuations and stock value prior and post important events and history of volume and trading levels. With all the right information, you mitigate the risk of loss in technical analysis.

The third important lesson to be a stock trader is understanding the importance of elements like risk management. Risk management comprises understanding risk per trade, position-sizing, when to stop loss planning and planning the profit levels. Evaluating these factors tell traders where to stop if they are facing loss or if they cannot decide whether to invest or not. For instance, understanding the risk to reward ratio helps traders make a decision on whether to invest or not on the basis of the ratio of the total risk of capital to potential reward on a single trade. If the reward ratio is less than one, then it is not advisable to trade.

Moving forward, it is commonly said excess of everything is bad. The same is true for trading. Most often traders feel the need to control their trades, most times they do so too. But then it cannot happen all the time considering the volatility of the market. The urges usually result in overtrading. Doing a lot of research and observing charts for longer can create confusion. To avoid reaching a point where you are trying to micromanage everything about trading, you need to take a step back and stick to your trading plan or even rework the strategy. You don’t have to trade at all market hours. You might think that by spending more time with the information you will be able to do better but overtrading will only lead you to losses.

Lastly, a trader’s psychology decides their success. One has to follow a certain belief system, trading process and consistency to become a successful trader. A successful trader wouldn’t be desperate to make gains overnight. You need the right mindset and approach to become a trader. One major quality in a professional trader that sets him apart is his performance. Rather than just focussing on just profits, you have to track your performance and make amends accordingly to your trading plan. If you are working as per your trading plan and making corrections to it, you will never get disappointed.

In a nutshell, no one learns trading in a day, neither is it gambling. To pursue trading full time, you need to understand the nuances of trading, when to start and where to stop, how much knowledge you need and learn from the mistakes. A few losses don’t mean you cannot be a trader, you have to believe in yourself and work on yourself consistently.