New generation traders are changing the landscape: How you can be successful?

Do you wonder what it takes to be successful in the world of financial markets?

There is no perfect recipe that suits all. If there was, all the traders and investors would have been millionaires easily.

Trading and investing have become a lot easier and more accessible thanks to the emergence of platforms that enable you to trade online. Using your phones, laptop and other gadgets, you can easily trade across the world.

But the question remains, how to be a successful online trader?

Whether it is trading in the stock market or CFD trading, one common trait you will see among the traders is that they have some common habits.

These sets of habits tend to differentiate successful traders from others. If you inculcate these habits, you can also be on track to be successful in trading. Now let us dive into some of these habits.

Have a plan, always !

In trading, you shouldn’t be like Phoebe from F.R.I.E.N.D.S., who does not even have a 'Pla'. Your trades may not always go according to plan. But if you do not have a plan when you take a position, you are inviting trouble.

Consistency is the key

If you think you are going to become rich by one trade, you are mistaken. Trying to make quick money in a few trades is highly risky. If you wish to generate returns over the long term, you need to trade consistently. However, this also does not mean you trade 24x7.

Have realistic expectations

There are only a handful of traders that beat the returns generated by the market indices like S&P 500, Nasdaq, etc. No one can guarantee they can generate an x per cent through trading. If you trade with the aim of generating 100 per cent returns in just a few days, your expectations are unrealistic.

Keep your emotions at bay

If you are a trader or investor, you would have had an instance where you held a position even when it was incurring losses. You may have held it thinking that it will be profitable soon. But till this day, it is not.

Emotions often make you take actions which go against the analysis. While in life you may 'trust your guts', in financial markets, rely on the analysis. Several successful traders rely on their analysis and know that it is essential to not mix feelings with investments and trades.

Have a stop loss in place

A stop loss is when your trading position is automatically squared off if your potential loss breaches a certain limit. For example, if you invest in a stock for Dh100 and have a stop loss of 20 per cent if the stock price falls below Dh80, the stock will be sold.

A stop loss is a great way to reduce your losses and also ensure that emotions do not get mixed.

Never stop learning

The markets are constantly adjusting and transforming. This requires you to constantly learn and adapt to new strategies. In trading, there are different trading strategies like swing trading strategies, arbitrage trading, intra-day trading and so on. You need to keep yourself aware of these and many more strategies. You also need to continue adapting these strategies to the ever-changing markets.

Vijay Valecha is the Chief Investment Officer at Century Financial.