Risk Management Plays essential role in the process if active stock market investors. because a, a active trader can make 90% profit, but if 10% of losing stocks are mishandled, this stocks can lose money on net basis. risk management is very important bur oftenly overlooked prerequisite to successful active trading. while investors who has make a good amount of profit over his whole lifetime can lose all of it in just one bad trade if proper management of risk is not taken. This article will provide you some simple strategies about stock market risk management.
Planning your trade
Take profit and stop loss this two points provides two key ways in which a active trader can plan in the process of stock market trading. successful active trader already has knowledge of what price they are willing to pay and at what price they are willing to sell stocks. and they also calculate the accepted return on investment against the circumstances of stock hitting the goal.
While Unsuccessful active stock market traders usually enters in stock market trading without have any knowledge of the points at which they will sell will sell at profit or a loss. Losses generally insist traders to hold on and they hope to get their money back. i the same way profit oftenly insist active traders hold on and get more profit.
Taking Profit point and stopping loss
Technical analysis of stock will always help you setting stop loss and take profit point. in addition, fundamental analysis of stock will play a important role in timing. if a active stock market trader is holding stock trade ahead of gaining as excitement builds, he or she may need decide to sell this stock trade before the news hits the market. of expected gin is to much high, in spite of whether the profit prices has been hit
Moving average provides the most popular way to set these points because they are very easy the calculate and commonly tracked by the market. Important moving averages are 5-,9-,-20-,-0-,100- and 200-day averages these sets are best whenever applying them to stock market chart and observing where the price has reacted to them in the past as either a support or resistance level.
Other best ways to trade stocks to place take - profit and stop loss levels is resistance trendiness, this is openly draw by connecting previous high and low value stocks the appears on significant basis above average volume. same like with moving averages main key here is determine trade lines and obviously on high volume.
Following are some key role that need to be consider while setting this points
. You need to use for more volatile stocks longer term moving averages in order to reduce stop loss order that is need to be executed.
. To match stock price ranges adjust the moving averages to reduced the number of signal generated.
. In the current high to low range stop loss should not be closer than 1.5 times. because it can be likely to executed without reason.
. According to market volatility adjust the stop loss. if the stock price is not moving, then and then only stock loss can be tightened.
. No need to us fundamental events like earning releases as key time period need to be in or out of a stock trading volatility and risk can rise.
The Bottom Line
About Enter or exit plan trader should always aware about the trade before they execute. A trader can minimize not only number of time a trade is exited needlessly but also losses. In conclusion you need to make your battle plan so you will already know you have won the stock market.