In your total funds, risk Capital is a part of your funds. The fund which you afford to loose is called as your risk capital. Why ? In case if you loose your risk capital it should not affect your life or make you bankrupt.
Dividing risk capital is most basic rule for successful capital managment. Divide in equal parts, preperably in 3 parts. Use 1 part for high risk trading like in equities, derivatives and stocks. 1 part in low risk investments like deliverable equities stocks, And hold 1 part for buying opportunity which comes accross.
Be ready, get plans, observe, study and stay focused on stocks which you like to enter. Observe trends and flow with trends, entering opposite to trends may be a disaster. Follow technical patterns, support level, resistance and breakout carefully. A successful trader always plans and strategically moves.
Hassle free trades, easy entry & exit and stop loss. It is recommended to enter and take a position in high volume active large-cap and mid-cap stocks, its help achieving targets due to the range of momentum these stocks have.
You may also invest in high volume active small caps if you want long term returns. Investing in low volume stocks & penny stocks are dangerous and should be avoided.
When the market moves everything looks lucrative. Enter in few stocks which you monitor. Getting in as many stocks will create a mess and will not be easy to monitor. It is best practice to trade in few stocks so you can easily stay focused and make a profit at ease.
Exits are important. Once you make a profit, exit. Re-enter only on corrections and in respect of support and resistance levels. Never ever overtrade, it will kill your profits and put you in the loss. Don't go beyond your risk capital. Especially in derivatives, some few trades can wipe out your capital. So, play carefully.
Don’t rush in a choppy, unclear, sideways market. Take holiday take rest, it’s not mandatory to trade where you are not clear on trends and moves. Better to stay away then making losses.
Buying or staying with bullish is the mentality. However, going short or selling stocks may sometimes give you handsome returns. Plan and analyze technical levels, support and resistance and go short accordingly and of course in respect of your risk capitals. Especially in derivatives you can go long on stocks and go short in options. Hedge your funds for better returns.
If you believe every trade you make will be profitable! Well, that’s highly mistaken you are. Be practical there is nothing like only profits, even big and experienced analyst make losses. The main thing is managing your risk and balance your losses. Learn from your mistakes and trade wisely.
True news will show instant effects on stocks/stock market. However, in the case of rumors you will not see any visible sign in stock market. Rumors are intentionally made viral by promotors, agents, brokers and people of the company for the benefit of company. Most of them are fake or exaggerated. It is good for successful trader to trust only reliable sources for news and fundamentals.
If you gain and want to trade further, it’s time to take partial profit. Book at least 50 percent profit at your desired level of gain. At the further level, you may book another 25% and at furthermore book the rest of the profit. This will decrease your risk and at the same time give you significantly increase profits.