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Sunday, 6 November 2011

Stock Trading Risk Management



                    Traders and investors need to understand the 'Stock Trading Risk Management'.The concept of Stock Trading Risk Management consists of learning about many things to help you to manage risks as well as money management. These money management rules will help you to identify how many shares you can buy or sell in particular trade.Some of those Risk Management Rules are sorted here
1. How big is my risk for one trade: Beginers must start with a small risk . Use 0.4% (or) 0.5% risk of the total account value and as your confidence grows you can increase it.

2. How many opened trades i can have at a time: Every trader must limit the maximum number of opened trades. The absolute maximum for a single person is eight open trades at once. During first year of your trading set this number of trades to the lower value like 3 or 4 max.
3. What is my risk reward ratio: Never, ever try to have the risk reward rati less than 2.5 to 1. This rule is crucial in your trading statistics. if you are new trader set this ratio 3:1
4. Trade only liquid stocks: Stocks above an average daily trading volumes over 3,00,000 shares traded per day (for swing trading) or above 10,00,000 shares per day (for online day trading)
5. Trade stocks with a price above $5USD: Stocks with a low price are not traded by big institutional trades and therefore they are easily manipulated. Technical Analysis can fail on such stocks. Also most big investment funds don't invest in such low priced stocks.
6. Spread sheet:All money management rules can be easily defined in spread sheet like excel or open office calc and then all values are calculated automatically as you are entering your set up Entry, stop-loss and targets.

7 comments:

వెంకట్. బి said...

Good Anila,
As a new investor what are the points I would be consider , and what type of risk I will be face.

worldknowledge said...

thanks venkat...i entered without knowing these things and lost my money..i wanted to help the people who are new to share market..

వెంకట్. బి said...

నేను చేతులు కాల్చుకున్న, మరల ఇన్వెస్ట్ చేద్దాం అనుకుంటున్నా. చిన్న investors గేమ్ ఆడకూడదు ఇన్వెస్ట్మెంట్ చేస్తూ ఉండటమే , అమ్మటం, కొనటం చేస్తూ ఉండాలి

worldknowledge said...

thats true venkat...nenu kuda loss lone unnanu...we decided to accumulate all my stocks..

Anonymous said...

SALAAM WALAKAM.....MR VENKAT GARU AND ANILA GARU.....NAA MOBILE NUMBER 09703214393....MEEKU XTRA KNOWLEDGE ABOUT INVEST MENT .....JUST CALL MEEE...KHUDA HAFFIZE....

Anonymous said...

what about the penny stock of calsrefinerie

worldknowledge said...

This is very difficult to say...who recommended you to buy that penny stock????i never suggest to take that stock....at present condition....

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