Techniques to manage risk in stock trading
A trader will need to manage your risk very well in order to gain constant profit. By managing the risk associated with stock trading, you’ll increase your chances of improving profits
As a stock market investor, you will need to manage your risk very well in order to gain constant profit. By managing the risk associated with stock trading, you’ll increase your chances of improving profits, and decrease your loss as well. For better result, many active traders also refer best stock tips to gain a massive outcome.
There are numerous areas in which you require to identify and manage your risk, and many things you can do to manage that risk successfully. Some of are following :
1.You should not fix a stop distances
A trader should not fix his stop loss at a specific point, instead of that he can use different points according to market situations. The market is constantly changing and therefore, the stock price can move rapidly and it fluctuates all the time. At the times of higher volatility, you should set your stop loss and take profit orders higher to avoid premature stop runs and in times of low volatility, you should set your orders just closer to your entry amount and please do not be overly optimistic in stock market trading.
2. Try to cut your losses, and run your profit
Some traders fixed a specific target and they take profits when that target is met. A smart and profitable trader will cut his losses by using different measures like stop loss order or any other. The main reason behind this is that if you are a disciplined trader, analyse the whole market situation and react accordingly. By cutting your loss and running profit you will get a better amount of profit.
3. A gain is not a gain until it realised
There are many traders who see that they are gaining target price and the stock is earning a profit, then they decide to hang on their position for a little more time with an aim to gain more profit because after all the stock is performing better. When the stock moves down a while, they still continue to hang on thinking it’s just a temporary downside. Don’t get stuck in this trap because anything will happen at any time if you are gaining well do not think that situations will we same in future.
4.Don’t use daily performance targets
Many traders set different targets based on daily or weekly performance. This approach can be very dangerous. You have to stop thinking in according to daily or weekly returns. Setting a daily and weekly performance creates a lot of pressure for the traders. It is also riskier for traders.
5.Balancing fear and greed
As a trader, there are two big emotions that you must have to control first fear and the second one is greed. To become a successful trader you must have to keep the balance between both your fear and greed because these two is very bad in every field. Many traders refer best trading tips like stock trading tips, binary option trading tips for better risk management and loss control.
Source: Free Articles from ArticlesFactory.com
ABOUT THE AUTHOR
I am Kirti meliwal, working as Associate financial consultant in Epic Research Limited-the leading advisory firm in India.I have good knowledge about stock market, so i used to write articles on the same.