Many are afraid of the stock markets because they think that it is a risky place to be in. However many others get attracted to the markets everyday hoping to get good returns and they end up taking unnecessary risks that not only give them losses when the markets become volatile, but also erode their entire trading capital.

If you all in any of these categories then we have some good news for you. Though the markets are indeed risky you can easily minimize the chances of a loss by following certain principles. These will ensure that you stay profitable in the long run and enjoy your experience of trading in the markets.

So what are the good behavioral skills that every trader must possess irrespective of whether they trading in stocks, futures and options? Let us get an understanding some of these golden rules that you need to follow if you want to trade systematically and make money from the markets.

Rule 1: Try to Make Your Entry Difficult so that You can Exit Your Trades Easily

Many traders jump into every opportunity that they see in the markets without doing their proper homework. Later they find it very difficult to exit the positions and often incur losses. Remember that it is very important that you research every strategy properly before placing a trade.

Rule 2: Decide Exit before Entry

Deciding the exit is more important than timing the entry. While creating every strategy, you must decide how you will exit the trade, both in times of profits as well as losses. This will ensure that you do not panic when the pressure to exit the trade builds up.

Rule 3: Strategy Limit

At any point of time do not try to execute 2-3 strategies. Anything more than this will make it very difficult to manage the positions and can lead to unnecessary tension and losses.

Rule 4: Manage Your Funds Wisely

While entering a trade do not block your entire capital in paying margins. Keep some of the money as a buffer so that you can use it during margin calls. Not only will this rule prevent you from over-leveraging your positions, it will also allow you to maintain your positions for a long time in adverse situations.

Rule 5: Do not Trade with Borrowed Funds

When you trade with borrowed funds, you will be under tremendous additional pressure. This is because repaying the amount will become very difficult if you incur a loss from your trades. This pressure can make you panic very easily if the markets go against you. You will end up taking the wrong decisions which will further increase your chances of losing money.

Rule 6: Don’t Over Trade

Knowing your risk appetite and financial capability will allow you to stay within limits while trading. One of the biggest reasons why people make a loss is because they take positions in futures by paying their entire money as initial margin. If the market moves adversely, then they find it incredibly difficult to arrange for more money to pay for their mark to market losses.

So define your trading limits at the very beginning and never go beyond that. This will help you to manage your positions better and also increase your capability to hold on to the positions should be markets move adversely.

Rule 7: Follow Strict Stop Loss and Target Levels

While creating a strategy it is very important that you define your exit points both when you are at a profit as well as at a loss. Defining the strict target levels and stop loss will enable you to stay in control of the two main emotions that drive every trader the market: greed and fear.

Rule 8: Never Panic

Often you will find that in spite of doing thorough research before placing a trade, the market will go against you. In such a situation you will have to maintain a cool head and not panic. Whenever you are stuck in a trade and do not have any way to exit the trade comfortably, simply square off your position instead of trying to rectify the situation. Thereafter, think of your next strategy with a fresh mind and try to spot opportunities that will enable you to make money from the markets.

Adhering to this rule will require you to control your emotions very effectively. Though this is a very difficult rule to follows, it is not an impossible one.

Rule 9: Be Patient

One of the biggest reasons why people incur losses in the market is because they expect to earn large profits from their trades at the shortest possible time.

Remember that even the best strategies in the market take time to yield the desired results. So if you have created a strategy, then patiently wait for it to generate the expected outcomes. Unless you are patient, you will definitely have knee jerk reaction whenever there is even a minor movement in the market and will either end up booking profits too early or booking losses too late.

Rule 10: Stay Updated

The key to succeed in the stock markets is to learn new strategies that can help you to earn profits confidently. This learning is a continuous process which has to be continued at all times. You should learn not only from the Indian stock market experts, but also from the foreigners who can show you the latest futures and options strategies that they are currently using. You can watch YouTube videos, follow websites and blogs of some famous traders and also search on Google to learn new strategies.

Follow these powerful rules to improve your effectiveness as a trader. You can also browse through our website www.finideas.com to know more about various futures and options strategies that you can use to profit from the markets. If you have any question or comment feel free to write to us. We would love to hear from you.