| Risk comes from not knowing the results of your | | | | you. |
| actions. At the same time it is equally true that the | | | | On the other hand if the price of your stock rose |
| root source of our earnings lies in our ability to take | | | | substantially above your buy price and fell down a |
| risks. Business, they say, is another word for taking | | | | little, it would not be a crash for you. |
| risks. For any investor, risk is a fact of life. | | | | In another example, the price of your stock has risen |
| There is a risk even in 'safe' investments such as | | | | substantially over your buy price. Then there is news |
| bank deposits, because the earnings from interest | | | | in the media about a strong and imminent correction. |
| may not be able to beat the rate of inflation. In | | | | There is a kind of stampede among the shareholders |
| financial matters risk can be translated as a state of | | | | in selling off their stock. Obviously the prices of the |
| uncertainty. It is a kind of deviation from the | | | | shares will fall. The next day, the correction does |
| standard norms. | | | | happen, but it comes as a far cry from being a |
| It is said that the more risk you take, the more | | | | potential collapse. It was like a straw that hit the |
| income you can make. The deeper you dive into the | | | | camel's back. |
| ocean, the more valuable gems you can find. The | | | | How should you manage your risk in stock trading? |
| opportunity to make profits from your investment is | | | | 1. The first and most important step in managing |
| associated with the possibility of suffering losses as | | | | your risk in stock trading is to diversify your portfolio. |
| well. While this argument is true to a great extent, | | | | Do not put all your eggs in one basket. If you lose in |
| taking risk should not become a game of gambling. | | | | one stock, you gain from the other. The loss will be |
| You cannot work in a state of fear and uncertainty. | | | | nullified to some extent. |
| Protecting yourself against excessive losses in stock | | | | Diversification means that not only should you invest |
| trading is called risk management. | | | | in a variety of stocks, but you should also invest in |
| The risk in stock trading stems primarily from the | | | | different types of investment plans. For example, |
| unpredictability or the volatility of the stock market. | | | | you may invest in ETFs, dividend reinvestment |
| You do not know when the price of your stock will | | | | plans-DRIPs-scheduled investment plans, retirement |
| suddenly fall. You have to live and work with the | | | | plans, and education plans and so on. |
| anxiety and fear of the unknown. | | | | 2. Price fluctuations are a characteristic feature of |
| A shrewd stock trader takes risks and uses | | | | stock trading. You must take a long-term horizon in |
| protective measures to reduce the possibility of | | | | investment. It has been found that despite ups and |
| losses. You should not dive into the ocean without | | | | downs in stock prices that occur almost on daily |
| protective life saving equipment. | | | | basis, the value of good quality stock rises over a |
| Risk management, first involves understanding the | | | | period of time. Patience and forbearance are |
| risks and then devising measure to secure against | | | | matchless virtues in stock trading. Don't let you heart |
| them. You need to properly evaluate the market | | | | beat fast or slow with every rise or fall in price of |
| risks and the level of uncertainty surrounding them. | | | | your stock. |
| Once you understand the nature of the risk and the | | | | 3. If you are a short-term investor, you must learn |
| level of your tolerance, the element of fear | | | | to fix an achievable target on the profit margin on |
| associated with risk is substantially reduced. | | | | your investment. You may, for example, fix a return |
| Here are some examples of risks that are an | | | | of 10% to 20% on your investment. As soon as the |
| inevitable accompaniment of stock trading. | | | | price of your stock rises to this level, you must sell |
| The sudden 'crash' in stock market price is often | | | | off your stock even if its price appears to be |
| cited as an example of risk. The implications of crash, | | | | shooting through the roof. Do not be taken in by the |
| however, differ from investor to investor. | | | | greed to let your investment double or treble before |
| Suppose you bought a stock at $ 100 per share. Its | | | | you decide to sell it. The price of the stock may |
| value increased to $200 in 15 months. Suddenly there | | | | crash down any moment dashing your dreams to |
| was a correction in stock prices. The price of your | | | | dust. |
| stock fell to, say, $50 per share. This was a crash for | | | | |