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What Are The Tricks To Manage Risk In The Stock Market?

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By Author: Parulsoni
Total Articles: 3
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Stock Market without risk cannot be expected. But if you know the tricks to manage risk then you will not be bonded yourself in any limits. Whatever section or segment in which you trade wouldn’t affect you. Here we describe you few of the major tricks to manage risk in Stock Market-
Follow the trend:- Trends are the directions at which stocks move either upward or downward based on whether the market is bullish or bearish. There is a specific time duration for each and every trend. Analysis of the current trend of Stock Market helps to predict the future trends for a market. For low-risk trading, you must follow the trend. But keep in mind that nobody can predict the trend of 100% accurately.
Rebalancing investments:- Rebalancing involves buying low or underperformed assets and selling the high rated assets in a portfolio to maintain a level of assets. For example, let’s take two stocks, Stock A and Stock B. If the value of Stock A increased by 25% while the value of Stock B increased by 5% then the portfolio will be tied to Stock A. But if Stock A experiences a sudden downturn then it will suffer from higher losses. Rebalancing lets the investor redirect some of the funds from Stock A to Stock B or purchasing entirely new stock to maintain a level of Stocks or risk-free trading.
Position sizing:- It involves not to invest in current stock or invest only a small amount of your capital if the current investment is riskier than others. A small loss is always better than the major one. Here you have got to shift some of the capital to cash.
Stop-Loss orders:- If you want to automatically sell out all or a portion of your investment in a given stock then always choose to place stop-loss or order your broker to sell a stock when a stop-loss position hits. Actually stop-loss is the position below which the chances of falling of value of a stock are maximum. So sell your stock before the value goes down.
Diversification in Stocks: - Try not to buy the stocks of the same company. The chances of loss in non-correlated stocks are lower than that of the same stocks.

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