In this blog, we are going to learn the basics of trading, which are the most important things a beginner must understand before starting their trading journey.
Here’s what you’ll learn in this blog—excited? Let’s dive in! 🚀
Contant list.
- Market Analysis
- Technical Analysis
- Fundamental Analysis
- Risk Management
- Set a Stop Loss
- Don’t Risk Too Much on One Trade
- Use Position Sizing
- Diversify Your Trades
- Avoid Overtrading
- Trading Strategy
- Entry Rules
- Exit Rules
- Risk Per Trade
- Time Frame
- Indicators & Tools
- Example: Moving Average Crossover
- Psychology and Discipline
- Trading Psychology
- Discipline in Trading
- Conclusion & Final Tips
1.Market analytics.
#what is market analytics?
Market analytics means studying information about a market to understand what is happening, why it is happening, and what might happen next.
It means analyzing the market through technical and fundamental analysis. These two help us understand market behavior.
. Technical analysis.
Analyzing the market using chart patterns, candlestick formations, trends, support and resistance levels, technical indicators, and volume helps predict future price action in the market.
. Fundamental analysis.
Gathering fundamental information about the company you want to trade in, like earnings and news, helps in making better trading decisions.
2.Risk management.
Risk management means finding possible problems before they happen and making a plan to avoid or reduce them.
Risk management in trading means protecting your money from big losses while trying to make a profit. It helps traders survive in the long run and prevents them from losing their capital.
Here are some points for managing the risk.
• Set a stop loss.
Stop loss is a price level decided by you where you have to exit from the trade if it goes against you.
It is limit set by you that how much money you can lose on one trade.
Example: You buy a stock at ₹100 and set a stop loss at ₹95. If the price drops to ₹95, you sell and take a ₹5 loss.
This help you to protect your capital by big losses.
• Don't take high risk on one single trade.
Only risk a small percentage of your total capital like 1% or 2%.
This prevents you from making bad trades that could harm your entire account.
Example: If you have ₹50,000, risking 1% means you can lose only ₹500 on one trade.
• Use Position sizing.
Position sizing means how many shares or contracts you buy.
It's calculated based on stop loss and risk per trade.
Formula:
Position Size = Risk per trade / (Entry price - Stop loss)
Example:
Trading Capital = ₹1,00,000
Risk per Trade = 1% of capital = ₹1,000
Entry Price = ₹200
Stop Loss = ₹190
(Means if price drops to ₹190, you will exit)
Loss per share = ₹200 - ₹190 = ₹10
Now use the formula:
Position Size = ₹1,000 / ₹10 = 100 shares
This means you should buy 100 shares. If the price hits ₹190, you lose ₹1,000 max — that’s your planned risk.
• Diversify Your Trades
Like real estate, stocks bonds, mutual funds, cryptocurrency, forex, commodity, etc.
For example: Instead of investing all your money in tech stocks, you could divide it among tech stocks, pharma stocks, gold, and index funds. This way, if one sector falls, others may balance the loss.
• Avoid Overtrading.
• Don’t trade too often or emotionally.
Example:
Rahul checks the stock market every 10 minutes and buys or sells stocks based on small price changes. One day, he buys a stock just because it’s going up fast, without checking news or doing research. The price drops sharply later, and he loses money.
Instead, Rahul should wait for a proper setup—like a stock breaking a resistance level with strong volume—and follow his trading plan. This way, he avoids emotional decisions and saves his capital for high-probability trades.
3.Trading strategy.
Trading strategy means a plan for buying and selling in the market to make a profit.
It mean that having a clear plan of entry and exit points, risk and reward ratio, and rules for buying and selling.
A Trading strategy is a plan or method by which a trader follow to decide when to buy when to sell a financial asset like stock forex or cryptocurrency to make a profit.
Basic parts of trading strategy.
. Entry rules.
When and why you will enter in a trade (eg, when price crossing evap the moving average).
. Exit rule.
When you will exit the trade (eg, when you reach to targeted profit or stop loss).
. Risk management.
How much money you will risk on each trade (eg, 1% of your capital).
. Time frame.
Are you trading in minute, hours, or days? (eg, intraday trading, swing trading, or long term investing).
. Indicator or tools.
Technical tools like RSI, MacD, and price pattern, that help you to make decision for taking trades.
Simple example.
Strategy: moving average crossover.
Buy when the 50- day moving average crosses above the 200- days moving average.
Sell when it crosses back below.
Risk only 2% of your total capital for trade.
4.Psychology and discipline.
How your mind and emotions affect your trading decisions.
I. Psychology.
Trading is not just about strategies or indicators—your mindset also plays a huge role in your journey.
Psychology challenges include.
- Fear - fear of losing money can stop us to taking good trade.
- Greed - greed leads you for overtrades or holding a losing position too long , hoping they will return around profit.
- Overconfidence - after a few wins ,trader may take unnecessary risk because of overconfidence .
- Revenge trading – trying to recover losses quickly can lead to emotional decisions and bigger losses.
- Impatience - many trader wants quick return and doesn't wait for good setup, which possibly make them to face losses.
- Key point - a trader must have control on their emotion while doing trading.
#What is discipline in trading ?
Following your trading plan no matter what happens.
II. Discipline.
Discipline means following your trading rules and plan no matter what.
- following your rule of entering and exiting from trade in discipline way.
- setting stop loss and having a clear mind set of exiting on Target.
- no trading when no looking a good trade in market.
- Do not risk your entire capital on one trade.
Note – psychology controls your emotions, and discipline controls your actions.
Key point - the best strategies of trading also fail if it do not follow the discipline.