How do I become a great stock trader?

The skills required to become a good stock trader are quite different than what is needed for a stock trader. Both are very different activities and require different sets of skills.

It will be easy to understand how one can become a good stock trader if you know about the basic difference between a stock market trader and an investor. So we will first have a brief look at how these two important parts are separated.

Investing can be a passive activity that can be taken without a high level of individual expertise along with existing job/ work and therefore is more suitable for the masses. You can easily undertake strategies like Buy and Hold, focus on few sectors, and undertake quarterly reviews of your portfolios which can be enough for a passive investor and can be done the comparatively lower level of expertise and as a passive activity as well.

Trading on the other hand requires a greater deal of time devotion and a good level of skill development in options and technical analysis before you begin. Therefore if you think you have such time and expertise over subject and confidence and risk-taking ability, you can surely go for trading.

Trading is a full-time activity and you trade on the short-term instruments, for a day to only a few months. The price movement is rapid and volatility is very high.

Therefore requires continuous tracking and a good hold of technical skills, prior trading experience, and good control of emotions in order to carry out sensible trade with consistency. Even after that, it requires a high-risk appetite to do, as even after many things correct, a single factor can cause huge price volatility in a short span. So it is only suitable if you have the good risk-taking ability.

Now once you know are familiar with this difference and have had a basic identification that you fit into the trading setup or not, you can learn about certain factors that you can use for you to have higher chances of success or rather lower chances of losing your hard-earned money while trading.

Let's look at some of the skills or practices that can be followed to improve trading skills.

Develop basic skills in Options strategies and Technical Analysis 

The first step in order to become a good trader is to gain expertise in some basic technical and options strategies. Trading can not be done with incomplete knowledge and you need to be technically sound in some important aspects in order to undertake successful trades.

You need to understand the basic options strategies to undertake Trade. Trades are not undertaken in singularity and a number of trades need to be placed together in a planned manner to build a suitable risk-return trade-off. Options strategies will help you gain this understanding of placing suitable trades together. 

Added to it, knowledge of Technical analysis also helps you build awareness around the price movement, volatility, and short term expected price movement of the instrument your trade-in. Therefore leaning these skills together can work well in your favor.

Practise and paper trade your strategy 

Trading is a very risky and unpredictable game. Even if you have gained sufficient knowledge, having a good experience is really important before starting. But how can one get the experience of a thing before staring?

You can gain experience by paper trading or executing your trades through a virtual platform. This will let you know the shortcomings and another side of your strategy and how your strategies can be suitably altered to have a better position, or if your specific strategy is suitable for the instrument you are trading in.

Therefore it is always recommended to practice you trade at least 10 to15 times on paper before you actually go and execute it. Make paper profit before to avoid actual losses. This will give you a much-needed experience for trading.

Control over your emotions

In a play like trading, where quick actions needed to be taken in a very short time in very volatile conditions, control of emotions can be a deciding factor as well. One needs to be emotionally strong patience and make quick decisions for better results.

1. Control on your emotions – In a play like trading, where quick actions needed to be taken in a very short time in very volatile conditions, control of emotions can be a deciding factor as well. One needs to be emotionally strong patient and make quick decisions for better results. Being greedy and patient at the wrong time in trading can be hugely loss-making even if your strategy is working well.  

Therefore being emotionally controlled will help you a lot here. Gaining prior experience in paper Tarde will also help you greatly for emotional strength. But maintaining it when actual money in stake is a different play together and should be maintained properly.

Choose your instrument and strategy wisely 

You cannot trade on every instrument available and apply every strategy possible. You need to be proficient and expert in using, applying, and understanding a few sets of strategies and choose certain instruments on which to apply these strategies. These instruments should be one whose movement you understand very well and are confident in trading on these and can track their movement better than other instruments.

Being wise about your choice of instrument you understand well and strategies you will apply to these are important and if you are able to choose one which better suits you, it will always give better results

Other Factors 

Added to all the factors mentioned there are some other factors that need to be seen. These are small factors and you will learn to have a gradual understanding over time, but knowing them now can always be helpful.

Keep proper track of your progress and failures. Learn from your mistakes and keep a record of which and how the strategies have worked for you and how will you proceed in the future. Plan the timings of your trade properly. The timings of trade, weekly or monthly expiry trade, and days left to expiry can play an important role as well.

Have at least basic information about options Greeks. What are the factors that affect premium and option prices and how are these controlled?

Trading is a complex, risky yet rewarding thing that is always important to maintain market liquidity. However, it is important to see whether these arrangements suit you or not. Trades should be executed in a planned manner and developing the above-mentioned skills can surely help you become a good trader and be in a better position, however, everything needs to be undertaken with great discipline for better results