People who come to the market or want to invest/trade in the market; would always keep looking for the some kind of holy grail which will make them rich overnight. But the first thing any investor/ trader needs to grasp very clearly in his/her mind that there is no such holy grail for the stock market. Even the most successful trader/investor do not possess any kind of secret composition that made them rich or successful in the market. But throughout their life time they followed a simple holy grail which always asked them to follow three basic steps:
1) Trading System.
2) Risk Reward.
3) Money Management.
Trading systems are the simple rules to follow which indicates a master trader/investor about the timing of getting into and out of market on the consistent basis without any exception which made them eventually a large money in the long run. People will keep arguing about A system is best or Z system is best. The simple point is that for some people Simple moving averages are the holy grail to follow and for other the complex neural network is. It depends on the individual with which system he is comfortable or understands well. So a trader/investor needs to learn about the different systems in detail before taking the plunge in the market and choose one which he will follow for at least his next 100 trading or investment decision.
The second building block of the Holy Grail of the Stock market is risk to reward analysis. A trader/investor should decide upon that what risk he is willing to take in order to make his reward. Some people are ready to take higher risk in order to make higher profits whereas on the other hand some people are comfortable only putting their small stake on risks in order to make a decent profit. But they should always zeroed on the risk to reward which is 1:1.5 or more than that because by simple logic if they are right half of time and wrong on the other half of time then their profits should be more than their losses so that in the long run, profits will take care of losses and make them a substantial returns.
The last and the most important building block of Holy Grail of the Stock Market is money management. All those people that had survived the big bad world of investment; they had taken money management as their priority and everything else as followed after that. The simple point is that nobody knows; how many of your trade will go wrong in a strings. You should be able to have a such kind of money management plan which will bear the strings of losses till the time when strings of profits are coming. Most of the traders just had such poor money management plan that few losses even in the starting had blown away their trading account. The simple rule for any trader/investor is that they should not put more than 1-2% of their capital on the risk and for the very aggressive trade/investor, it should not exceed more than 3-4% of their total trading capital.
A trader/investor should follow his system, manage his risk very well and keep doing the same thing again and again.
1) Trading System.
2) Risk Reward.
3) Money Management.
Trading systems are the simple rules to follow which indicates a master trader/investor about the timing of getting into and out of market on the consistent basis without any exception which made them eventually a large money in the long run. People will keep arguing about A system is best or Z system is best. The simple point is that for some people Simple moving averages are the holy grail to follow and for other the complex neural network is. It depends on the individual with which system he is comfortable or understands well. So a trader/investor needs to learn about the different systems in detail before taking the plunge in the market and choose one which he will follow for at least his next 100 trading or investment decision.
The second building block of the Holy Grail of the Stock market is risk to reward analysis. A trader/investor should decide upon that what risk he is willing to take in order to make his reward. Some people are ready to take higher risk in order to make higher profits whereas on the other hand some people are comfortable only putting their small stake on risks in order to make a decent profit. But they should always zeroed on the risk to reward which is 1:1.5 or more than that because by simple logic if they are right half of time and wrong on the other half of time then their profits should be more than their losses so that in the long run, profits will take care of losses and make them a substantial returns.
The last and the most important building block of Holy Grail of the Stock Market is money management. All those people that had survived the big bad world of investment; they had taken money management as their priority and everything else as followed after that. The simple point is that nobody knows; how many of your trade will go wrong in a strings. You should be able to have a such kind of money management plan which will bear the strings of losses till the time when strings of profits are coming. Most of the traders just had such poor money management plan that few losses even in the starting had blown away their trading account. The simple rule for any trader/investor is that they should not put more than 1-2% of their capital on the risk and for the very aggressive trade/investor, it should not exceed more than 3-4% of their total trading capital.
A trader/investor should follow his system, manage his risk very well and keep doing the same thing again and again.