Day 2 – Building Your First Mock Portfolio & Learning Entry/Exit Points




Introduction

Welcome back!
Yesterday, you built the foundation — understanding what the stock market is, identifying whether you’re a trader or investor, defining your goals, learning basic terms, and starting a risk-conscious mindset.

Today, we move from theory to practice — still without risking real money.

Your Day 2 objectives:

  1. Set up a mock portfolio using paper trading.

  2. Learn the basic rules for choosing stocks.

  3. Understand when to buy (entry points) and when to sell (exit points).

By the end of today, you’ll feel like you’re “in the market” — but without the stress of losing real money.

Step 1: Setting Up Your Paper Trading Account

If you didn’t do it yesterday, today’s the day.
A paper trading account lets you trade in real market conditions but with virtual money.

Popular Platforms for Paper Trading:

  • TradingView (free plan has paper trading)

  • TD Ameritrade’s Thinkorswim (excellent for charting)

  • Investopedia Simulator (good for beginners)

  • Zerodha Varsity + Kite (India) demo features

What to do:

  • Create your account.

  • Start with a balance that matches your realistic starting capital. If you plan to invest $5,000 in real life, set your virtual balance to $5,000 — not $1 million.

  • Familiarize yourself with placing market and limit orders.

Why this matters:
Paper trading builds muscle memory — by the time you use real money, the mechanics will feel second nature.

Step 2: Choosing Stocks for Your Mock Portfolio

You might be tempted to pick the hottest trending stocks right away. Resist.
Instead, build a balanced mock portfolio that reflects your Day 1 goals.

If you’re an investor, consider:

  • Blue-chip stocks: Apple (AAPL), Microsoft (MSFT), Reliance Industries, TCS.

  • Index funds/ETFs: S&P 500 ETF (SPY), Nifty 50 ETF.

If you’re a trader, consider:

  • Stocks with high liquidity (lots of buyers/sellers).

  • Moderate-to-high volatility (price moves enough to trade). Examples: Tesla (TSLA), Adani Enterprises, HDFC Bank.

Rule:
Your first mock portfolio should have 5–8 stocks, not more. Too many will dilute your focus.

Step 3: Learning Entry Points (When to Buy)

The biggest rookie mistake: buying without a plan.

Two main approaches to entry points:

A. Fundamental Entry Points (Investors)

  • Buy when the company’s fundamentals are strong but the market undervalues it.

  • Look for:

    • Price-to-Earnings (P/E) ratio lower than industry average.

    • Strong quarterly earnings growth.

    • Positive news about expansion, products, or partnerships.

Example:
If Infosys reports a 20% profit increase but the stock dips due to temporary market panic, that’s a potential buy.

B. Technical Entry Points (Traders)

  • Buy based on chart patterns, trends, and indicators.

  • Common tools:

    • Support level: Price area where stock tends to stop falling.

    • Moving Averages (MA): Many traders buy when the short-term MA crosses above the long-term MA (golden cross).

    • Breakouts: Price moves above a resistance level with high volume.

Example:
Tesla’s stock breaks above $250 with high trading volume — traders might enter expecting continued momentum.

Pro Tip for Day 2:
Only enter a trade if you can clearly explain why you’re buying at that specific moment. If your answer is “because it’s going up,” you’re gambling.

Step 4: Learning Exit Points (When to Sell)

Selling is often harder than buying. Greed tells you to hold longer; fear makes you sell too early.

Two main exit strategies:

A. Profit Targets

  • Set a pre-determined percentage gain at which you’ll sell.

  • Investors: 15–30% in the short term, or hold for years.

  • Traders: 2–5% in day trades, 5–15% in swing trades.

Example:
You buy Reliance at ₹2,500 and set a target of ₹2,750 (10% gain). Once it hits, you sell — even if it might go higher.

B. Stop-Loss Orders

  • A pre-set price to sell if the trade goes against you.

  • Protects you from large losses.

  • Common rule: Risk only 1–2% of your total capital per trade.

Example:
Buy at ₹100 with a stop-loss at ₹96. If the price drops to ₹96, you automatically sell.

Pro Tip for Emotional Discipline:
Write down your entry and exit rules before buying. Don’t change them mid-trade unless there’s a genuine market reason — not emotion.

Step 5: Position Sizing

Even in a mock portfolio, practice proper position sizing — deciding how much money to put into each trade.

Formula for traders:

Position Size = (Account Size × Risk per Trade) ÷ (Entry Price – Stop-Loss Price)

Example:

  • Account size: $5,000

  • Risk per trade: 2% ($100)

  • Entry: $50, Stop-loss: $48 ($2 risk per share)

  • Position size = $100 ÷ $2 = 50 shares

This ensures one bad trade won’t destroy your account.

Step 6: Executing Your First Mock Trades

Now it’s time to act.

  • Pick 2–3 stocks from your list.

  • Enter trades using your chosen entry strategies.

  • Set both profit target and stop-loss at the time of entry.

Record details in a Trade Journal:

  • Date & time

  • Stock name & ticker

  • Entry price

  • Exit price (planned)

  • Stop-loss (planned)

  • Reason for trade (technical/fundamental)

Your journal will become your best teacher.

Step 7: Observing the Market in Real-Time

After placing mock trades, spend time watching how prices move.
You’ll notice patterns:

  • Stocks often move more during the first and last hour of the trading day.

  • Certain sectors move together (e.g., tech stocks, banking stocks).

  • News releases can cause sudden price spikes or drops.

Use Day 2 to observe without reacting impulsively.

Step 8: End-of-Day Review

At the market close:

  • Check your open trades.

  • See if any hit the stop-loss or profit target.

  • Note how close they came.

Key questions for your review:

  1. Did I follow my entry/exit plan?

  2. Were my stop-loss and profit target realistic?

  3. Did I let emotions influence me?

Step 9: Avoiding Common Beginner Mistakes

  • Overtrading: Too many trades at once. Start small.

  • Chasing: Buying a stock after it has already risen sharply.

  • Ignoring risk management: Skipping stop-losses.

  • Falling in love with a stock: Hold because you like the company, even when it’s losing money.

Day 2 is about practice, not perfection. Mistakes are good here — as long as you learn from them.

Your Day 2 Action Plan

By the end of today, you should have:

  1. A working paper trading account.

  2. A list of 5–8 stocks in your mock portfolio.

  3. At least 2–3 executed mock trades with written entry/exit rules.

  4. A trade journal started.

  5. End-of-day review notes.

A Glimpse of Tomorrow (Day 3)

Tomorrow, we’ll focus on technical chart reading for beginners — learning how to recognize patterns that can signal profitable trades before they happen. We’ll explore moving averages, RSI, MACD, and basic candlestick formations.

Final Thought for Day 2:
In the market, making money is not about being right all the time — it’s about managing losses when you’re wrong and letting profits run when you’re right. Day 2 is where you start training that mindse


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