Trading sounds like a great profession, right?
It DOESN'T ask for any Educational Background,
you can make some quick money by just being online
for few hours a day,
and it doesn't need any Human Interaction!
So the pandemic can go to hell..
because you can't lose your job!
BUT... that's not the whole story.
Nikhil Kamath has been doing it for more than 17 years now,
which is why this video will be incomplete without Nikhil sharing with us
his experiences and learnings of becoming a trader.
So Ladies & Gentlemen, it doesn't matter if you
want to be a full-time trader or a part-time trader and
don't know anything about trading,
today by the end of this video,
you'll know exactly where to start
because in today's video we are going to see..
6 simple steps you can take as a beginner,
to become a day trader.
And towards the end, I'll give you a Bonus Tip
so that like most traders..
you don't lose all your money in the Stock Market on the first day.
And as always, if you like the efforts we put in,
in making our videos, then make sure you hit that 'like' button..
Let's begin.
First, let's start by understanding, what is trading?
In the Stock Market, there are 2 major types of participants..
Investors and Traders.
Long-term Investors (like myself), identify good companies
and hold their stocks for years, hoping that their value will increase over-time.
But Day Traders, buy and sell securities and sell them on the same day
with the goal of making a profit.
You might've heard that statistically
>95% of traders lose money.
Because trading is risky.
So if you are a beginner, here are the six things
you can do so that you don't commit the same mistakes
as those 95%.
Step #6: Follow the News
What's interesting is that, all types of news...
Local, National and International have the power to affect the Stock Market prices.
News like...
Vaccine Production,
Company Merger,
Rupee vs Dollar rate,
Union Budget,
Elections,
even Rain Predictions.
So as a beginner, your job is to first follow news regularly
and observe how it is impacting the stock market prices.
Which companies are getting most affected and how.
Now, the question arises...
what kind of news resources to follow?
So don't go by news sites where they are recommending
you buy or sell a certain equity,
but rather pick news sources which are
a little bit more objective about data.
There is a website called screener.in which is decent.
Finshots are great. Finshots put financial articles in a
manner that simplify.
But I would say you can find everything for free out there.
There is no reason for you to go pay,
2000 or 3000 USD per month to get a Bloomberg terminal.
If you were to look and research,
you will find free sources which are very good.
The most obvious free source is Google News.
You can follow the business news in particular.
For company specific news, check out screener.in or Ticker.Finology.in
and Finshots newsletter for getting your simplified
daily dose of the market.
As a beginner, you can start with these
and the more you read,
the more personalised favourite resources you will find.
Step #5: Read some Books!
There are high chances that you are here, because..
some Movie or TV Series
has gotten you interested in the Stock Market.
But if all that trading jargon has gotten you confused, then
here are some books that can help..
Try Jack Schwager's 'Market Wizards', he has a couple of them.
There is 'Reminiscences of a Stock Operator' which is decent.
In these, traders talk about what they did,
so they are quite interesting. They are like story books.
If you want to do something more Fundamental in nature,
you can read Graham's 'The Intelligent Investor'.
If you want to do something technical in nature,
I think Candlesticks are a good place to start.
So may be Steve Nison's books on Candlesticks.
I've left the Amazon links of all these books in the description.
These books will help you understand some basics,
a little bit about fundamental analysis,
a little bit about technical analysis,
which in turn, you can use to build your own trading strategies,
which brings us to Step #4..
Learn Risk Management.
You must've heard a lot of people referring to trading as...
Gambling!
But the difference between a trader and a gambler is...
Risk Management.
To give you an example..
Some traders might put all of their trading capital, say..
Rs. 20,000 on 1 stock (XYZ) hoping that it'll go up by 5 points.
But they don't prepare for what will happen if it goes down.
But Risk Management, allows you to protect yourself
when things don't go according to your plan.
Let's ask Nikhil how he manages his risks
so that he doesn't loose as much, even on those 'not so good' days.
Very simple rules that I think everybody needs to adhere to...
The more you leverage, the easier and the more
likelier the odds of you losing the money are.
So try to shy away from leverage.
Having a Stop Loss is a good rule.
If you are buying something at 100,
you might be right 5 times, wrong 5 times.
When you are wrong, you need a stop loss.
So if the 100 becomes 90, you kinda exit it.
Another great rule out there, is to diversify.
Never put all your eggs in one basket.
If you have 100 rupees to allocate, buy 10 different things..
Just stick to Large-Cap, diversify as much as possible is
probably the best risk management one can do.
So as a beginner, here are some things you can learn
to control your risks as a trader...
Learn some basic terms and concepts, like..
Risk Per Trade,
Risk to Reward ratio,
Position Sizing, Risk Capital..
As Nikhil mentioned, always have a Stop Loss for all your trades.
To understand, what is Stop Loss and how to place it
while you are trading in the Stock Market..
watch this video, which shows in a simplified manner
how you can enter a trade, along with a Stop Loss.
I've left the link of this video in the description.
Open a book and journal all of your trades.
This will help you discover your trading style,
what kind of companies you like trading in,
what trading strategy works best for you and so on...
Yeah, I think journaling your trades is a great idea. It is.
I think the entire intention with trading has to be,
to be able to learn from what you did wrong,
and journalling plays a huge part in it.
As a beginner, you need to understand that
trading is not about the money you make,
it's about the money you protect.
And the more money of yours you protect,
the longer you can stay in the game.
Step #3: Learn Fundamental Analysis
Before I tell you why, let's first
hear from Nikhil how his trading strategies
have evolved overtime.
When I started, Fundamental Analysis
was what ruled my trading mechanism for the first few years,
this was followed by technical analysis,
beyond that I got into a little bit more quantitative stuff.
Correlation and Mean Regression when things
kinda become volatile very quickly, how you benefit from that.
That was followed by Sentimental Analysis.
Kinda trying to gauge sentiment.
At the end of the day, the price of a company either goes up or goes down
not based on all of the other metrics we just discussed
but based on people and sentiment.
So I went through these 4 phases largely,
each lasting a couple of years.
Now, I feel like a combination of the 4 works for me.
So yes, Technical Analysis is at the core of trading
but if you are new, it's good to start by understanding
how to evaluate the true worth of a company.
And what helps you do that?
Ding ding ding... Fundamental Analysis.
So as a beginner, here is what you can do..
Pick a large-cap company,
especially from the sector you are familiar with.
Let's suppose you are from I.T.
Then may be pick TCS or Infosys
and add them to your watchlist.
On one hand, perform fundamental analysis of this company, like..
read their balance sheets, read about their management..
And on the other hand, observe how current news
is fluctuating its market value.
Yup, combine it with Step #6.
Now, how to do this?
Again, for that.. watch this video, which will help you understand
how to add companies to your watchlist.
People might say that Fundamental Analysis is not important for trading..
But this will help you understand the personality of those stocks better..
which inturn will help you make better trading decisions.
Infact, I want you to comment below and commit to making a start..
by telling me, which company you are going to start with first.
For example...
Step #2: Avoid Trader Bad Habits
Even before you enter the market, remember to avoid these
common trader bad habits that make them lose too much too soon.
Some of those mistakes are..
Trading based on 'tips' or 'alerts' from random chat rooms
instead of doing their own research.
Not following a trading plan and instead,
making random trades when the market opens
that are driven by emotions like fear, greed or worse..
boredom.
Failing to plan for failure a.k.a
not doing any Risk Management.
And this is a big one...
Trading with their Living Expenses, instead of their disposable income.
Let's ask Nikhil what bad habits he has observed among traders...
I think all of what you said is a bad habit. But..
none more so than leverage.
I think that is the biggest killer in the stock market.
Don't try and mimic what someone else is doing or recommending.
Generally, if somebody is recommending you 'BUY' something,
if their trading system was working
they would be out there trading and not recommending.
You could flip a coin, pick a large-cap equity
and you would do reasonably okay.
The rules behind it...
I think what you do after you buy
become significantly more important.
Don't let emotions weigh you into thinking..
you made the right decision or the wrong decision, but...
buy something, put a Stop Loss,
retain the ability to delay gratification,
follow your rules and I think you'll do okay trading.
Step #1: Learn how to use a trading platform.
Obviously, the first step to trade is to open a trading account and
learn how to use the platform.
And the reason why I showed you the watchlist today on the Zerodha platform
is NOT because I interviewed Nikhil Kamath
but because I use Zerodha for investing
both in Stocks and Mutual Funds.
Especially because it is India's #1 discount broker in terms of active clients.
And this one video, will take you through the entire process
of how to open an account,
how to execute your first trade
and how to make your first investment using Zerodha.
I am overwhelmed with all the love this video has received,
inspite of being so technical.
So incase you haven't watched it already,
then I've left it's link in the description.
Do check it out.
Now, before I give you the Bonus Tip,
if you've liked today's video..
then tell it to the Youtube algorithm
by hitting that 'like' button
so that Youtube recommends you more of my videos in future too.
And don't forget to 'Subscribe' to this channel and hit that 'bell' icon
because we make Career and Finance videos that are crisp and to the point.
I promise, I don't make unnecessary videos.
I only make them after proper research and analysis.
Sitting on a beach with your laptop,
working for just 2 hrs everyday,
driving Lamborghinis and
sipping Pina Coladas on a beach!
Trading is nothing like that!
And that's unfortunately why most people lose money.
So today's Bonus Tip is this...
With trading, have realistic expectations.
Nikhil says, if you expect you'll make 15%, then
you'll be more likely to achieve that
rather than thinking that you'll make 40-50%
which will make you take unnecessary risks
that'll make you lose money.
Don't get me wrong, I'm not discouraging you from trading.
I just want to set your expectations right.
So read books, apply what you have read,
build your own strategies,
invest little amounts first
and find out if trading sparks joy.
May be you'll enjoy being a trader,
may be you'll discover that trading is not for you..
and instead you want to become a
long-term investor in the stock market.
Either way, watch these 2 videos next..
to learn what is Stock Market and how to invest in it.
And at the end of these 2 videos, I assure you
you will have a better clarity about
which direction you'd like to take.
You can access these 2 videos, by clicking right here.
I thank Nikhil for taking out the time to interview with us,
even when he was feeling a little under weather.
Thank you team Urban Fight, this has been great.
This has been a lot of fun and
hope to chat with you guys in the future as well.
And thank you for watching this video.
I am Taskeen. This is The Urban Fight
and I'll see you in the next video.