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Share trading involves a lot of risk and financial losses. Still, it is attractive for investors to make quick bucks as risk can be managed with smart and informed decisions in a disciplined approach.
Here are the safety points that can help you on your way to reduce the risk involved in share trading and increase the possibilities of making money.
1. Skill of Analysis:
Risk management largely depends upon your knowledge and ability of technical analysis. Technical analysis can be expressed as the science of forecasting prices based on available data about a stock. This skill can be brushed up only with the gained experience in the stock market. Keep working on increasing your knowledge and consult with your stockbroker to get updates on the market. You can take the help of professional software for detailed technical analysis.
2. Skill of being disciplined:
The key to a successful trade is to use a stop-loss order. It helps traders to square off a position at the desired price automatically and minimize the possible losses. While placing a trade order, be absolutely clear about the loss you are ready to take. Discipline in online share trading is important. Do not get perturbed by emotions and unsolicited advice.
3. Skill of Controlling Emotions:
Trading is the battle of emotions. When traders are making money, they can be trapped by greed to make them wait for more profits, and they do not book their profits in the wait of more. On the other side, they can be caught by fear when prices fall and sell their stocks earlier. They can overcome such situations only if they know how much and when to book profit/loss. You need to build a habit to learn what not to do along with what should be done during trading to deal with emotions.
4. Planning with Minimum Capital:
One should identify a few stocks with strong fundamentals and focus on them and invest only an amount that your profile allows you to lose. For beginners, experts suggest trading in Nifty-50 stocks. Keep extra funds aside that are not a part of your core savings and you are willing to invest it with a possibility of loss. Make sure this capital should not be borrowed. Disaster strikes when the facility of marginal trading is overused for online share trading. Use this facility from brokers in limit only. Check on each and every detail of margin trading when you open a trading account with a brokerage firm.
5. Avoid herd mentality
There is a strict No to buy stocks just because others are buying. Do not follow the herd mentality of buying more stocks when the price of a stock starts sinking if it is not a part of your strategy. Enter at the right time. Wait for it instead of investing with a herd mentality.
The Bottom Line
Trading is the option for investors who can control emotions and are ready to take a risk. You cannot start trading just after reading the tips. Take your time to develop a few skills to minimize future issues. Search for an opportunity in every market move. Develop the skill to set targets based on analysis and then book profit/loss at the target point. And most importantly do not follow the herd mentality. Create your own strategy and stick to it. You can improvise it and make it better with time as your learning improves. Also, you can keep trading portfolio separate from the investment portfolio. This will help you keep a track of your investments dedicated for long term and short term.
