Start trading with these seven methods to be a pro investor

Booking profits in the stock markets requires strategic trades. Pros plan their trades, execute them and keep their losses to a minimum. Only a small percentage of traders can succeed and stay long with profitability in the market. Long-term profitability requires a set of strategies that can perform well and tackle bull and bear impulses. Let us discuss seven rules to help you stay in the long-time professional minority circle.

1. Have a Trading Plan

A trading plan is a set of directions defining entry and exit points for every trade. Only a planned trade can go well for a stock trader as they need to be disciplined. A strategic trade can make it possible. The key here is to stick to the plan. Traders consider quantitative factors while buying or selling financial securities without being influenced by emotions like fear or greed. Traders can ensure a strategically disciplined trade to avoid losses.

If required, you can use the technology to test a trading idea before risking your capital - called backtesting. It is the practice to know the profitability of your trade using historical data. While opening a demat account with a stockbroker, look at their trading platform if it is advanced enough for applying these strategies on trades. Sometimes a trading plan won't work in specific market conditions. You can start over. Traders can update the trading plan weekly or monthly to use new ideas.

1. Cut Losses and Protect Your Trading Capital

Cutting losses is a helpful technique in stock trading that helps to survive long in the stock market to be a pro. Profitable stock trading requires managing risks. It may sound simple, but most investors have realized how difficult it is to master the most crucial rule - minimizing the risk and protecting their capital. Cutting losses means selling a stock when it is down 5% from your purchase price rather than selling it later at a high loss. It helps you to prevent the situation from becoming worse, and you will be able to protect your capital. You can start small using your demat account and trading account. For free demat account opening, you can consider a reputed discount broker.

1. Risk that You Can Afford to Lose

Losing money is traumatic enough for any individual. Before you start trading with your hard-earned money, make sure you check your financial strength and put the money in your trading account if it is truly spare. If it's not, you should keep saving until it is. Avoid using borrowed funds or funds you accumulated for your kids' education or paying the mortgage. The borrowed money will be another obligation in your life.

1. Focus on Risk Rather than Returns

Stock investments possess an equal share of profits and risks. The higher an asset's returns, the higher the risk it involves. It would be best to manage the risks involved first to enjoy returns. If your risk appetite does not allow you to take high risks, it is good to exit from the position at current profits, no matter how high-profit potential the stock has. Otherwise, you are exposed to the risk involved in the trade.

1. Do not follow the crowd

Long-term profitability in the stock market requires staying ahead of the crowd. Pros do not follow the crowd. They learn and keep increasing their knowledge about the stock market and its movements. It is better to stay away from tips and chat rooms for stock trading and trust your knowledge and experience. They will not be as serious about your money as you are. You should have a record of your previous trades and look at losses and find the reason behind such losses. It will help you to learn from your mistakes.

1. Always Use a Stop Loss

Most professional traders consider the stop-loss their friend. It is one of the pillars of safe stock trading. Stop-loss orders help traders automatically exit a position at a lower loss percentage to prevent extreme losses. You can set a predetermined risk amount or percentage that you are ready to take on each trade. You will not lose all your capital even if a trade turns sour. Using a stop loss can take out some of the stress of trading because you know you will lose that set amount only on any given trade. Pros prefer to use a stop loss even if it is a winning trade and you are confident enough. Thus, protective stop loss helps traders to ensure that losses and risks are limited.

1. Know When to Stop Trading

Trading for personal gains requires immense discipline. Pros accept the losses and take time with a new strategy and perspective. Know when to stop and take a break from trading.

Each of these rules is vital for stock traders, and the effect is strong when implied together. Traders should keep these important rules in mind to increase their odds of success in the markets.

Nancy Ahuja is a self-dependent girl who has been running her business for the last 3 years in Delhi. She has a couple of years of experience in the field of business and loves to write about finance, gadgets, business, and lifestyle.