Stock trading is a very lucrative business. But the number of successful stock traders in the investment industry is very low. The majority of the stock traders fail to make a profit since they don’t have any clue regarding the nature of the stock market. They start trading the real market with an aggressive strategy and try to become rich without analyzing the risk factors. To become a profitable stock trader, you have to follow some basic steps. In this article, we will teach you four easy steps that can improve your stock trading skills.
Step 1, pick the major stocks
The selection of the stock plays a great role in your trading success. If you trade unregulated stocks or minor stocks, you are going to have a tough time. Though these stocks can rally higher in no time the risk factor is very high. At the initial stage, the selection of the major stick might be a hectic task. But if you read some books on stock trading you will understand why it’s better to trade the most popular stocks. Most importantly, getting tuned with the latest market news on popular stocks is easy. So, stop trying to trade the unknown stocks at the initial stage as it increases the risk and makes your trading life harder.
Step 2, demo trade the market
Before you start trading the real stock market, you need to use the demo account to develop your skills. Just like the demo account in Forex trading, you can get access to the stock demo account. Practice trading the major stocks and you will slowly learn how to place the perfect trades without taking high risk. Trading is all about precision. And the demo account will give you the perfect learning platform where you can learn trading without risking a big sum of capital. By practicing in the demo account you will learn to trade the major stock like a pro trader. Those who bypass the demo trading stage always blow up the trading account. Thanks to the elite class broker Rakuten for offering such a great demo trading platform to learn the art of trading free of cost. Take advantage of the demo account and improve your stock trading skills.
Step 3, the risk to reward ratio
Trading the market with 1:1 or negative risk to reward ratio is one of the key reasons for losing a big sum of money. Those who are new to the trading industry are losing money regularly since they don’t use the concept of risk to reward ratio. If you want to become a profitable stock trader, you must learn to trade the market with 1:4 + risk to reward to ratio. To find such great trade setups, you must rely on the daily or weekly time frame. Never think you can scalp the major stock and make a big profit. To become a professional’s to trader, you must learn to analyze the bigger time frame. And this is the only way you can secure a high risk to reward ratio in each trade.
Step 4, risk management policy
Making consistent profit is not possible in stock trading. At times you will lose some trades and this should not make you frustrated. Trading is all about precision and managed risk factors. The smart traders always focus on the long term goals and they trade with minimum risk exposure. Though you will get access to a high leverage trading account, you should think about the result of each trade. Let’s say, you have risked 10% in a single trade. So if you lose the trade, you will face an extreme level of difficulties to recover the loss. So, create a suitable risk management plan so that you can perfectly use the trading strategy without risking too much. Be safe and follow a conservative trading technique.