Investing in stock market depend on knowledge, timing, strategy and experience. Money is last thing you need. Money is one of the tools to earn profit but merely investing large sum of money in stock market is never recommended unless you hire a good financial advisor who has deep knowledge about different levers of stock trading.
Four Ways of Stock Trading
All your trades should end in one of four ways: a small win, a big win, a small loss, or break even. You should never experience a big loss. If you can get rid of big losses, you have a great chance of being profitable for years to come. Before you understand how to open demat account online, you must know how traders when starting out often discover that big losses are the one thing that hurt their overall long term returns the most. If those few big losses were removed, their returns would go up dramatically. The fastest way to improve your trading returns is to immediately stop having the few big losses that force you to give back weeks, and sometimes months of winning trading profits. Again the steps to cut down losses depends on exit period you choose. Greed to wait for recovery incur huge losses to the stocks.
Stop Loss Method
The use of a stop loss on every trade is the one thing that can stop you from having huge losses after you start trading in your demat account with low brokerage. A stop loss is the cost of insurance you pay to avoid being caught on the wrong side of a large market trend. It may be frustrating to have a small loss, then the market reverses and goes in your direction. However, it is still better to insure that you have a small loss than risk a big one. Small loss keeps your diversified portfolio healthy otherwise you have to sell your most of the stocks to make up for the losses and come out of debts.
Stop Loss Pricing
Stop losses should be placed at a price level that will not be easily reached unless your trade is not going to work out. Stop losses should be placed outside the range of normal price action and out of the reach of ‘noise’. When you enter a discretionary trade, find the spot where you say “If price gets to this level, then I am probably wrong about the direction.”
Stop loss pricing is important to absorb small losses. Pre-decided pricing helps you in budgeting and planning ahead to continue stock trading for other options.
Stop Loss Trailers
Trailing stops help you maximise gains by raising your stops as a winning trade trends in your direction. In strong trends, the 5 day EMA (Exponential Moving Average) or 10 day SMA (Simple Moving Average Exponential Moving Average) can be an excellent end of day stop if price closes below these levels. Get in the habit of knowing where your stop loss will be before you enter a trade. Small losses is one of the primary ways to experience profitable trading with a best share trading app that most successful traders download to invest in Indian stock market.
