The Biggest Trading Lessons of 2020

The year 2020 has been insanely tumultuous: Volatile trading sessions, the shortest bear market, a ferocious bull run, an unprecedented global lockdown,  In 2020, we had a bear market, a bull market, a recession, all-time highs (a bubble?). All in the same year. 

Nobody can see the future

If there’s one overarching lesson of the year, it’s that no one knows what’s going to happen. Certainty has frequently been rewarded with a cruel sense of humor throughout history, and this year saw everything change in stark ways that everybody knows all too well.

Back in March, economists, politicians, and investors laid out scenarios of the potential impact of the coronavirus on the economy, public health, and the stock market — as well as how society might have to respond. Who could have imagined Nifty going from 12430 to 7511 and than back to 14010. Markets are unpredictable and lot of traders lost big money in Shorting the Market. To Trade in Market you need to stick to a trading system and leave your BIAS Outside the trading ring. Unthinkable things can happen in Financial markets we saw Crude trading Negative First time in History.

Take small risks

This is one of the most important trading lessons for beginners. When starting out especially, best practice is to not risk a large amount of your account on any one trading idea. If the idea turns out to be wrong, you risk losing a higher proportion of your funds, and it will take larger gains to get the money back. It is common to be wrong when starting out and mistakes are a valuable learning lesson, so a defensive strategy is important in managing risk.

If an idea fails to pan out, avoid taking the additional risk to chase the market – there is always another trading opportunity waiting around the corner.

Trade with the trend

Trends can persist for much longer than we expect. As John Maynard Keynes memorably said, “The market can remain irrational longer than you can stay solvent”. It is highly unlikely that an TRADER can identify the exact turning point at which an asset price bottoms out or peaks. Instead, trading with the trend is much less stressful. NIFTY  made Bottom on 23 March the say LOCKDOWN was announced and closing the Year of New Life Highs.

One of the top trading lessons is that trends can persist for weeks at a time and present plenty of trading opportunities, so there is no need to rush a decision and end up on the wrong side of a trade.

Avoid analysis paralysis

Trading platforms and apps increasingly offer a range of sophisticated analytical tools. Investors can use a range of technical indicators including moving averages, Bollinger bands (standard deviation from moving averages), moving average convergence divergence (MACD) and relative strength index (RSI) to help make trading decisions.

But while technical analysis is valuable, a crowded chart can be overwhelming for a new traders, with some indicators giving buy signals while others simultaneously showing sell signals. That can make it easier to overthink and harder to see what the market is actually doing.

Instead, start off with a clean chart to focus on price action and identify the trend in the market, then add one or two indicators to keep it simple.