Algorithmic Trading

Follow these rules to be successful in stock trading

There is no reason why anyone with an analytical mind and a patient disposition can not make money from stock trading, but there is one big reason that most would not. The same is the lack of risk management, discipline and trading psychology. In this write-up we would touch upon 8 pointers which if incorporated into one’s trading habits would fast-track one’s ride to trading success.

Don’t be a compulsive trader

The biggest disservice that you can do to yourself as a trader is to adopt the habit of trading compulsively. There is only one person who gets rich by your placing trades every-day, and it’s not you but your broker. Trade when the opportunity presents itself and not while being driven by your whims and fancies.

Trade when the opportunity presents itself and not while being driven by your whims and fancies. – Click To Tweet

Successful Stock Trading is a game of discipline

Before you buy or sell, a few data-points relating to the trade must be absolutely clear. The desired buying price, possible targets, stop loss price, position size, rationale for entry etc. are to be arrived at and noted in your trading journal. This serves as a bible to weed out inconsistencies in your approach and make improvements to your trading plan. People not adopting this approach, fail to make the necessary improvements which this art requires.

Trading is not a Science but an Art!

There could be 2 successful traders looking at the same chart and have diametrically opposite views. This is because there is nothing guaranteed in Technical Analysis and the practitioners employ their discretion to form opinions about their trades. Very often you could come across Technical Patterns which look perfect but end up fizzling out. It is also not an uncommon occurrence for a not so perfect pattern to work like a charm. This could not be more truer in this era of Algorithmic Trading where trades are entered as rules rather than being driver by human intellect. The experienced practitioner is able to use his experience of interpreting 1000’s of charts to better identify trading opportunities.


Trading is a game of probabilities and not certainties.

There are no certainties in Technical Analysis. Traders employ proper risk reward ratios to arrive at an optimum risk. This if extrapolated across multiple trades with even a 50 % success ratio can create an enormous amount of wealth. The writer has had a habit of taking trades only with a 1:4 risk reward, which has proved to be very a successful approach, while trading with Live Audiences.

Trade in your zone

Know your trading style and stick to your zone. If you are a swing trader, use that as your timeframe. If you are better with positional trades go for those. Never try to become a master of all trades, when in all likelihood this would lead to your becoming a jack of none. Also know what are you most comfortable with, trading pullback’s, buying breakout’s etc. These are your best bets against wrong entries. No indicator, pattern works 100% of the time and these must be coupled with chart structure, fundamentals to arrive at the best entries.

Confirm across Time-frames

The best trades are the one’s where the trade is verified against all timeframes. Long term trends can impact short term positions and confirming against multiple timeframes can reduce false-entries. This is an important but oft-neglected rule which is essential for trading success

Stock Trading

Reduce your Trading Costs

Trading is not about winning big on one singular trade. This is more about having multiple small profits which add up to a nice corpus. Towards this it makes sense to reduce cost of entry and the same can be achieved by reducing brokerage costs and putting only limit orders. Using a discount broker can lower your trading costs to 0 for delivery trades and Rs. 20 or 0.01% for intraday/F&O, which ever is lower. This when extrapolated to multiple trades can lead to a savings of lakhs of Rupees annually for traders. Start using a discount broker for your trades, if you are not already using one. Here’s a link to open a discount brokerage account free of cost with added benefits worth Rs. 28000 worth of subscriptions on sites such as Advisory Mandi, Tavaga etc.

The other practise to incorporate is to place only Limit and not Market Orders. Remember, there is never a dearth of opportunities in the markets, and there is absolutely never a need for entering a stock at any price. Opportunities fly by while we sit regretting those that have passed us by.

Opportunities fly by while we sit regretting those that have passed us by. – Click To Tweet

Don’t Predict but Follow

The market is smarter than the collective intelligence of all the traders combined, and hence there is nothing to be achieved by predicting price movements. Follow the trend rather than predict it. The sooner we accept this reality the better for us. As they say, trend is the best friend that you can ever have in the financial markets.

To conclude, trading is not rocket-science, but it’s definitely a tough skill to master. Incorporating the above habits can definitely give you a head-start towards becoming a better trader. Having gone through the article, it would also make sense to read about seven ways to conquer greed and fear, which are key vices to overcome towards trading success.

Go, earn your billions !

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