To start with, let me tell you the 3 main components that must present for the market to run. You know it very well. For those who don’t know, these include Buyers, Sellers, and the Instrument (Be it stock, futures/options lot, currency or commodity). The prices are changing of these instruments because of its Demand or Supply on that particular day. We may also call it Support or Resistance.
If we talk about Mentality, we must Buy when prices are cheap and should Sell when prices are expensive. It’s as simple as that. But why often we act the opposite? This is because when prices are cheap (it means the Red candles, bad news, bear market) makes us fearsome and we don’t dare to Buy (which we should always do) AND when prices are expensive (it means all Green candles, good news, bull market) makes us greedy and we force ourselves to Buy (which we shouldn’t do).
But then how we make the decision to Buy / Sell the stock? Here, the trading methodology will help you out.
To make the decision, we should always look at the Chart. Yes, the chart gives us a basic yet powerful idea about the prices. Price is the best indicator to look upon. You use many indicators such as MACD, RSI, Bolinger Band to name a few. But these all follow the price. It means you get the signal on these indicators when the price has already made a move. Therefore if you buy after the signal is made you are a little too late for the entry. Take a look at the SUNPHARMA FEB FUT as on 3 Feb and its movement further.
Now after seeing the charts you must have gained some sense about the price movement. Yes, the fear of losing and greed for making more money forces you to take wrong decision. There is a saying “Greed & Impatience are the causes of most of the losses in stock markets”. Hence you need to maintain your emotions right in front of the screen.
Go to the Chart Review section to check the outcome of SUNPHARMA Feb Future contract bought on 3 Feb Here.
The winning mindset is what we must possess when we are in front of the trading screen. The constant change in the market conditions makes you emotionally tired. You may deviate from your well thought-out trading plan. The key is to having a healthy attitude about losing, having a strong trading strategy and the confidence & discipline to follow it is of great importance to success in this business. Once you start following these trading methods, you’ll soon become a master trader in intraday as well as swing trading.
Trading Rules – A True Capital Protector