These are cases where small investors with limited or no understanding take the step without serious thought to prevent losses if there is an unfavorable fluctuation in the market. Let’s start with a quick course on the stock market for beginners.
What are your business styles?
Let’s understand it with a cricket analogy. Cricket, in a broader sense, is about – a batsman scoring a run, a bowler taking a goal and the players trying to defend the run.
But there are different types of cricket games like the T20 one-day fast-paced, and the long 5-day test game. It requires different tactics and temperaments in each format. For example, aggression needs to be at its peak in T20 while patience needs to be at its peak in an experimental game.
The same goes for trading, it’s all about buying and selling, but it has different formats like intraday trading, volatile trading and position trading.
The main distinction between business styles is Time Factor. In-day trading is about buying and selling within the trading day. An aggressive fluctuating trading session is about a few days to a week. The defense fluctuation is about a week to a month and position trading holds trades from month to year.
What is your business style?
In fact, it is very difficult to answer at an early stage. We usually choose a business style in a very liberal way due to external factors such as capital requirements, promotion, revenue requirements, etc., the time factor, etc. It usually takes some time to get the right answer.
Have you ever faced a business-style business?
It is very obvious and natural to happen as we choose a business style on a shaky basis. Sometimes we feel like trading within the day and then we change our minds to trade volatile. Sometimes we do R&D and sometimes we think about investments and so on. It can happen in any order. Have you been through this? If so, that’s a no-brainer.
Is there a cure for retailers?
We can not completely smooth it out, but we should manage it with a conscious approach.
Among the different formats, position trading is about buying and holding for many months to years. It’s a good format, but it will give less exposure to traders as they will trade much less. Within a day trading, on the other hand, will yield too many trades. So it will be the right approach to achieve a balance between extremes.
The answer lies in volatile trading. Because it is not too catchy and less catchy. It maintains a good balance between homework (analysis) and business execution. In swing trading, it does not have a very tight or loose stop loss. So it is ideal to start a volatile trade, as the trading period is a few weeks to a month.
The best way to choose is through elimination
When we start practicing swing trading, we need to try other business formats, but the ultimate goal is to find comfort with a business style that suits our personality and keep at it. One can have combinations of business styles. For example, say 70% risk for position trading and 30% risk for volatile trading.
To end it, I can only say one thing that your business style needs to reflect your own identity.
(Kapil Shah is a technician at Emkay Global Financial Services Ltd and a trainer at Finlearn Academy)
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