Introduction-Being a trader is not easy in life because share market price goes up and down.A lot of fluctuation is going on by seeing market situations.In this article, we will learn about how we can minimize stop loss in tading.
What is stop loss: It is a price in which a trader will sell the share at minimum rate to prevent further losses.There are two types of stop losses
Fixed stop loss : It is a price in which the orders will be executed.
Trailing stop loss : It is a stop loss in which we can ajust according by seeing market conditions which are going move and up.
It is very important to set up stop loss before buying a stock because it will prevent you from future risk.
Strategies to reduce stop loss : We will use some strategies to check how we can analyze deeper stock value and pricing.
Technical Analysis: It is an analysis in which it can tell how you can read the candlesticks by using technical analysis.By analyzing the candlebars in which price level it showing trend lines, either moving above resistance or below resistance.Then place a stop loss according to resistance levels.
Technical Indicators: There are some indicators in which moving averages(MA),moving average convergence divergence((MACD), which can make it easy to detect trend lines or patterns.
By taking some examples that can really visualize the concept of trading.
Example: If a stock previous one month value is 400 and now the current price is 420, you can set up a loss at 395 that can provide a buffer against minor fluctuation while protecting against significant downward movements.
There are a lot of indicators that can really give us 90% idea of how the market reacts by seeing the candle bars.
Risk management techniques: It is a technique in which traders have to take more risk in particular stock price.Also, to maintain proper positioning sizing according to risk management.We can understand this technique by simple example like we have to take risk only 1-2% of your trading money which is more than sufficient.Taking more risk will really become riskier in future trading.No other capital will left in your account,so it is better to take a risk with proper strategy by making stop loss and further aspects.
Also, we can use some algorithms in trading.Many traders use different indicators to become successful traders.It requires a lot of proper deep knowledge about proper indicators how and when to use in the right way.Also, to handle risk management according to capital.Investing in mutual funds is more better than investing in stock because in mutual funds risk is less as compared to stocks.Investing in stocks not an easy work it needs your proper time as market starts from 9am to 5pm.
Historical data of stocks: It is very required to see its history price before buying stock.Also, to see its cash flow,chart reading,market capital, and debts by seeing all details of particular stocks.Testing trading strategies on historical data to evaluate their effectiveness.It helps to minimize the stop loss.
What are common mistakes to avoid in stocks: we will cover some major mistake which trader do while buying or selling stocks
Emotional trading: We dont have to lose our motion while purchasing or selling the stocks.It is important to stick your predefined strategy and avoid impulsive decisions.
Time management: It is very required to be on time in our life even stocks too.Market starts from 9am to 5pm according to indian standard time.We have to analyze each and every position by giving our time in this market.
Risk management: It is very required to invest in stocks by checking our money to trade.Many new traders start investing more and more in stocks in which they often loose their money because they are entering in this market to make money not to learn.Experience is very required in this stock market not only knowledge can help you to become successful trader.Both will be equal manage experience and knowledge with proper risk management.
We should get knowledge or information about stock by reading newspapers or news to get to stay updated on time.Keep looking at market news and trends that could impact your trades.Also, to maintain a trading journal by checking all documents your trades,including stop loss levels and outcomes,to analyze and improve your strategy.
Managing a stop loss effectively is a great sign for traders to become successful.By applying all fundamentals and technical indicators to check the position sizing,diversification,trailing stop loss, and protect their investment.