Trading plan holds key to better returns

The best use of a trading plan is to eliminate emotions. A trading plan has a predetermined stop loss, target and an accurate entry price.

Some people have lost money in the stock market by not maintaining a stop loss. They hold on to the stock even when it falls assuming it would bounce back again only to realise later that it has further fallen.

Whenever we maintain a stop loss, there is a higher probability to win in another trade. Besides, if we have a trade plan, our trading will be driven by concepts and not emotions.

It's always good to exit with a strict stop loss. A best trader should control his emotions and not let the trade be run by emotions.

Another concept which pulls us down is averaging. Never try to average a trade because the probability of the stock moving up is always bleak.

Market is neither a friend nor an enemy of anyone. Maintain a proper target and exit from a profitable trade. Let greed not overrule you.

Just as Virat or Sachin cannot hit a six for every ball, you cannot make profit in every trade. Peanut profits are sometimes better. It is better to have small profits than a huge loss.

Every trader is bound to make some mistakes. It is always better to get small and consistent profits. Never take tips from anyone or rather do not pay anyone for tips.

By doing so you tend to become dependent on them and even their calls sometimes end up in loss. Over a period, you tend to stop studying and making analysis on your own.

First try to learn and then you can definitely earn. Instead of relying on tips its always better to believe in your own analysis.

Sometimes we see a stock which has moved by 10 per cent the day before and we regret for not investing and on the next day if you take the same trade, it may fall.

Never regret for such decisions. Sometimes you may exit from a stock with small profit to realise that it has increased furthermore. Once you exit, come out of the trade, don't look back. Never allow emotions to rule you.

Nowadays, YouTube and other platforms are loaded with free calls. It is better to trust your own wisdom. Some calls given in one telegram channel are posted in another.

Winning probability of the calls is not assured. Study the trend and invest in the direction of the trade for small and consistent profits. Create a fine balance between fear and greed. These small tips will help in the long run.

(The author is a homemaker who dabbles in stock market investments in free time)