Stock trading is not like participating in the Forex market. Being a currency trader, you can manage to make a decent profit without analyzing the important news factors. But if you start trading the major stock, you must gain knowledge on fundamental analysis. Analyzing the economic information of the major stocks provide the most suitable profit-taking opportunity. You might be good at currency trading business but this is not going to make you a successful stock trader. Let’s discuss the three cardinal rules which you must follow to trade the major stocks. These are –
- Selection of the trading asset
- In-depth market analysis
- Determining the risk to reward ratio
Selection of the trading asset
The naive traders don’t understand the importance of stock selection. They are randomly trading the market without even understand how it can affect their trading performance. On the other hand, the skilled traders at Juno Market preferred to trade the major stocks only. Trading the major stocks provides a unique profit-taking opportunity for the retail traders.
You don’t have to push yourself to the edge to develop these skills. Just learning about the most popular stocks would be enough. Instead of analyzing too many stocks, you should create a small list. Though it will be a complicated process, it can save a huge amount of money. Some of you might think trading the penny stock is the most efficient way to make big profits. Penny stock might go significantly higher and it can also drop to a great extent without giving you any prior notice.
In-depth market analysis
Do you know why the professional traders are always looking for the best introducing broker? The experienced traders love to analyze the data with a high level of accuracy. If you do the market analysis in the lower time frame, it would be really hard to make the right decision. Unless you have access to the advanced trading platform, you can’t do the technical and fundamental analysis with a high level of accuracy.
Majority of the traders are failing to make a profit in the stock market since they don’t have enough knowledge to place the trade. As a currency trader, you should always to improve your trading skills by using the best trading tools. The rookie traders often think too many indicators can help them to pick the best stock. But if you this was so easy, no one would have made any profit. Being a currency trader, you have to think about the long term goals. So, never execute any trade without having any valid reason.
Determining the risk to reward ratio
Determining the risk to reward ratio is the most complicated task in the trading business. If you look at the experienced traders, you want to take too much time to develop your trading skills. The naive traders are losing money since they always take big losses. And when it comes to the winning trades, they are just booking a small portion of the profit. Unless you are trading the market with a 1:3+ risk to reward ratio, changing your life will be a very difficult task. At the initial stage, you should use the demo account to understand the concept of risk to reward ratio. Once you master this technique, you can improve your skills over time. Being a fulltime trader, always try to trade the market with managed risk. But following the risk management policy in each trade is not going to help. Think about the recovery factors in trading. One single winner must recover 4 losing orders. Unless you are doing so, making consistent profit in the stock market will be very challenging.
Stock trading is only for skilled investors. You must pay attention to the minor details of the market. If you want to become a profitable stock trader, make sure you are following these rules very precisely.