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3 Stages of Learning the Stock Market?

by Vishweshwar H S – Professional Stock Market Coach -

The stock market is a highly rewarding and income-generating activity. Like any profession – doctors, engineers, chartered accountants, etc., or any business engaged in commercial activity. It is very important to learn and understand all aspects of the stock market. More importantly, understanding and managing the risk. If not, it will considerably lose our hard-earned money!

The stock market has high volatility (high movement up and down), sideways movement, and we can use various instruments to invest or trade. But we all have different:

  • objectives (time commitment with the current job),
  • capital to trade (small capital or, large capital),
  • time frames (long-term or short-term),
  • risk appetite (minimum risk with moderate reward or high risk with high reward).

These depend on income level, age, time availability, and ability to take risks of each individual.

Let’s know look how to learn and master the art of investment or trade.


Stage 1: Stock Market Learn with the Professional Trainer!

Professionals like doctors, engineers, etc. have to undergo serious education or training. So do the investor or trader!. This stage though we learn practical aspects of trading, we should refrain from actual trading. But we can do paper trading (what you learned should writedown in paper with the actual market and see what result you get) or simulated trading. Understanding dynamic market movement, risk-reward, leverage, rules of the exchange, etc. has practical difficulties for the first-timers in the stock market. Learn more about the stock market – attend online /offline training, read stock market books, and training youtube videos, etc.

One can earn money from the stock market in two ways.

  • Long term: Using fundamental analysis with the purpose of wealth creation. This a process of identifying good growing business and investing for the horizon of 4-5 years. We expect anything above ( Bank interest (7-8%) + inflation (4-5%) + Investing premium 4-5%)) approximately (15% to 18% CAGR), with (2-3%) risk. This is called Investing. Some of the concepts are Value investing, Growth investing, etc.
  • Short-term: Using technical analysis to earn monthly income. This is a process of learning technical analysis, charts, edge (high probability trade) with risk to reward ratio for the duration of anywhere between a couple of minutes to a few months. We can expect 3-4%/month kind of returns but also have high risk. If we do not manage our risk, we may lose most of our capital also! This is called Trading. Some of the concepts are Price Action Trading, Indicator based trading, market profile, etc.


Stage 2: Practice and Skill Development

“Slip between cup and lip.” This stage, we understand the real practical difficulties of trading. All training and knowledge we have to be understood – figure out what type of trade only we trade? Our ability to risk? And patience and perseverance one needs to a successful trader!. This stage only we put actually small money and trade with small quanity to understand the market and, more importantly, our strengths and weakness. The stock knowledge, software, trade setups, etc. will not be of use unless we practice our skills and improve our trading skill. Generally, our idea of getting rich quickly in the stock market will convert into “small but consistency earning”!


Stage 3: Evolving as “Successful Independent Trader”

This stage we have trade execution plan, entry and exit with risk to reward of trade, position-sizing, trading journal, continuous educating ourselves to be a better trader. This stage we are committing a large sum of money and can live of earned money from the stock market. At this stage, we can learn managing our risk very well. The execution of trade will be more fluent. Any trade will not unnerve us as our risk measure will take care. We also improve our risk 1:3, 1:4 etc. find the real big earning over the period!.

After visiting this blog, decide yourself now, are you, the investor? Or a trader?. Kindly share and comment on this article.

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