10 Steps That Helps You to be a Successful Trader in Stock Market

10 Steps to be successful trader in stock market :-

Are you incurring continuing losses in trading in stock, future & Option (Call and Put Option) and unable to get the reason and earning profit. Here are 10 Hacks that help to you knowing the reason for the same and converting your losses into profit (Blog is going to be to long hope you get something worthy) :-

First(1^st)  : Earning without learning is not possible

Right know everyone in stock market want to earn profit but they don’t know the policy of stock market if one person is earning profit that means another will getting loss or higher purchase value. Nothing is free in stock market.

 They require (90:10) Thump Rule that means 90% Skills required and 10% Luck (Because in stock market you can’t get absolute assurance due to tons of factor you get reasonable assurance that’s why that 10 % is nothing but the difference between the reasonable assurance and Absolute assurance). Point how to get the skill to be successful in stock market. Below herewith are top 5 books that’s give something valuable :

S. No.	Book Name	Author	Concept inbuilt
1.	Learn to Earn	By Peter Lynch	- How ‘US’ Economy grow from zero to ‘n’ -Why investment in stock market is required -Factor that keep you in mind before investment
2.	Stock To Riches	By Parag Pareikh	-Investing Basic -Behavioural Finance -Traders & Investors Psychology
3	Romancing the Balance Sheet	By Anil Lamba	How to done analysis over Balance sheet
4	Common Stocks and uncommon profits	By Philip  Fisher	-Qualitative Analysis -Mr. Fisher’s Philosophy -Investment Principles
5	The Intelligent Investor	By Benjamin Graham	-For Advanced analysis

Every author give their lifetime experience in terms of books. Its on you how you use their concepts in practical scenario.  Books Include 1)Fundamental Analysis 2) Technical Analysis 3) Behavioural Finance 4) Traders & Investors Psychology 5) Many Advanced Level Concept.

Second(2^nd) : Find Stock having strong fundamental

After going through above mention books or if your concept of basic is already clear you can continue to second step  “Find Stock having strong fundamental”( Fundamental analysis is based on the assumption that the share prices depend upon the future dividends expected by the shareholders. The present value of the future dividends can be calculated by discounting the cash flows at an appropriate discount rate and is known as the ‘intrinsic value of the share'.

Third(3^rd) : Find Stock Which not so much volatile in nature

The Stock which is most volatile in nature on most of the trading day in week. That stock rarely follow their fundamental & technical analysis stock in that type of stock movement can be made upto 1- 25 % (+-) (eg of stock in Indian Stock Market is Yes Bank Ltd., Infibeam , PC Jewellers.

Fourth(4^th) : Apply Technical Analysis to find Support & Resistance

‘’Technical Analysis’’ is a method of share price movements based on a

study of price graphs or charts on the assumption that share price trends

are repetitive, that since investor psychology follows a certain pattern,

what is seen to have happened before is likely to be repeated.

There is more than 100 Indicator that provided by Depository Participant (i.e. Zerodha Ltd., Sharekhan etc.) & also by few website when of them is ‘’ www.investing.com ‘’

Indicator that are mostly used in stock market are

·        Moving Average Indicator

·        MACD Indicator

·        Volume Indicator

·        RSI Indicator

That most of indicator is used to determine for support and resistance. Likewise in below image

             ASHOK LEYLAND LTD (SCREENSHOT DATED 18-MAY-2020)

Ashok Leyland Ltd closing price of stock on 18-may-2020 is amouting to Rs.43.85 per share. As you the horizontal line provided that support level which are

Ranking	Support Level
First Rank	40.93
Second Rank	38.09
Third Rank	35.51

 

Fifth (5^th) : Apply Option Chain to Find Support and Resistance

By using option chain  on <website link> <https://www1.nseindia.com/live_market/dynaContent/live_watch/option_chain/optionKeys.jsp?symbolCode=228&symbol=ASHOKLEY&symbol=ASHOK&instrument=OPTSTK&date=-&segmentLink=17&segmentLink=17 this help you to find the support & resistance>

While using option chain analysis, we analysis situation from the hand of ‘Option writer’ (Option seller) instead of ‘Option holder’ (Option Buyer). Because writer take higher risk than holder as well as higher margin requirement of writer.

 

As shown in above image

·        highest Put option open position  show that the Lowest price that stock can touch or Support point

Ranking	Support Level
First Rank	42.5
Second Rank	40
Third Rank	37.5

As you seen in option chain image the open interest is 11,04,000 at strike price of Rs.42.5 in which addition during the day in open interest is 2,08,000 in their corresponding call option the open interest is 1,60,000 and increase during the day is 1,04,000. That clearly indicate that put option is stronger at strike price of Rs. 42.5. If put option is stronger that means put writer is better situation and call writer that indicate put writer can not let the ashok Leyland price below Rs. 42.5 that why it is their first support. In the same way the second and third support is Rs. 40.7 and 37.7.

Note : Strike price Rs. 45 is not taken as support option because it is already out the money option.

·        highest call option open position at <x> show that the highest price that stock can touch or Resistance point (Likewise you can draw for resistance level)

 

Sixth (6^th) : Find Common Support and Resistance

The resistance & support level (Calculated as per Step-5) that closest to corresponding support and resistance calculated by using indicator (Calculated as per Step-4). You find Common Support and Resistance

Common Support <41>  - that the level where you can take buy call with stop loss of 1%-2%.

·        Common Resistance <x> - that the level where you can take Sell call with stop loss of 1%-2%.(Likewise you can calculate for resistance level)

Seventh(7^th) : Check the Spot Price of Stock near to support and Resistance

Check whether the spot price (i.e. current market price) is near to support or resistance and plan your  entry as specified in step-8

Eight (8^th) : Take entry in Stock with Stop Loss

Common Support <41> - that the level where you can take buy call with stop loss of 1%-2%.

Common Resistance <x> - that the level where you can take Sell call with stop loss of 1%-2%.(Likewise you can calculate for resistance level)

Nine (9^th) : Done the Behavioral Analysis

If you are not using stop loss strictly advise not to take entry because when the spot price is near to support and resistance. That time there is an ‘’accumulation phase of potential buyer and potential seller’’. So need to analyses the situation accordingly.

Ten (10^th) : Taking Exit Call

Take exit call in the following situation :-

Call taken up	Situation	Square off position when
If you take buy position	If spot price went below support Level	Take automatic exit when stop loss hit
	If spot price above from support level	Book reasonable profit accordingly
If you take Sell sell	If spot price went below resistance level	Book reasonable profit accordingly
	If spot price above from resistance level	Take automatic exit when stop loss hit

 

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Note : Stock market is subject to market risk please take prior advise from your investor banker before making any investment in stock market. The above content in my views that help you to extend your knowledge.