The cycle of work and retirement is in need of an upgrade. This is because sustaining the same lifestyle that you have while you work could become difficult after your retirement due to inflation and little to no increment in salaries during your work tenure.
This means that we, as salaried workers, have to save every rupee that we can afford to in order to buy a house, put our kids through college, handle emergency medical expenses and live a comfortable life after retirement. This means compromise, cutting down on luxuries and of course, extensive financial planning.
While there are several options for you to plan your finances like investing in mutual funds and SIPs, one of the best ways to get very high returns on your capital is trading directly in the share market. Even though it comes with its inherent risks, trading with discipline and proper risk management could go a long way in mitigating them. You can refer to our ‘Ten Tenets to Trade as a Successful Entrepreneur’ to get a comprehensive understanding of how you can go about starting your trading career.
So, here are the steps you need to follow to get the complete handle of share trading.
Save for the Capital
The idea is to earn with any surplus money you have and use that as the capital for your trading. This means that you have to save a considerable part of your salary every month and until it reaches a certain amount.
Open a Trading Account
Once you have saved enough capital, you can get down to actual business and open a trading account and demat account using which you can place orders with the NSE or BSE.
Zebu is one of India’s leading brokerage firms which understands your trading needs and provides you with the winning edge you require to succeed. Contact us to open your trading account in three very easy steps.
Devise a Day Trading Strategy
Most trading platforms come with tools which help you devise a trading strategy. A strategy must include:
- Defined entry and exit points
- Provisions for risk management
- Size of the position
There are several tested strategies like Open High Low and Pivot Trading, which you can tweak as per your risk appetite and market expectations. You can also experiment and create your own strategies.
Backtest the Strategy
Once you have finalised your strategy, you can backtest it on historical data to see how it would have performed over the time period you have selected.
Trade with the Strategy on Paper or with a Small Capital
If the results of the backtest are promising, you can go ahead and start paper trading or trading with a small capital.
Follow with Discipline for the Long Term
Ensure that you trade with the strategy for a considerable amount of time before accepting it or rejecting it. Ensure that it is deployed during all the different conditions of the market and provides you with profits throughout the period.
However, there could be certain strategies which give profitable returns only during an uptrend of a downtrend. In those situations, it is important to insulate your capital with adequate risk management techniques.
Once you have decided on a strategy, stick to it for the long term and see how the results can do wonders for your financial planning.
Bonus Step: Compounding is King
It could be tempting to take out your profits every month to live purely off of it. But compounding even half your profits to increase your capital can exponentially increase your returns in the long term.
Follow these steps to effectively make your money work for you and see your returns grow. Happy trading!