Trading in Stock Market - Risk and Return.



Trading in stock market is a high risk business. This may look very attractive and easy way to make money. Initially in one or two trades, with our luck this may give a good return without knowing much about the market. This success may motivate us to invest more money and make more money quickly. Investing in stock market without proper understating of the market and without the strict discipline may result in losses. Following are the few suggestions if you are interested to start trading in stock market.

Invest small amount: Initially start trading with small amount of capital of Rs. 30,000 to Rs. 50,000.

Waite for Opportunity: Wait for the opportunity in the market. The market trend may not be suitable for trade all the time. Sometimes the market may be directionless or side way. Wait for the profitable ideas and do the trading. The intension should be to make money and not to do trading just for trading sake.

Do some homework: Before entering in to trade, analysis of the stock and the market trend is required. Any scheduled announcements or news affecting the stock should be studied. The entry point, target and stop loss should be decided before entering into trade.


Understand the risk: Understand the risk of trading in each stock. Some stocks are highly volatile and they may reverse the trend very quickly. Study of historical price movement may help in trading such stocks.


Patience makes everything: Patience is very important to trade in stock market. One should not expect all the trade should result in profits and should not hold the position all the time. Entering the trade without proper study or without waiting for the correct price level will result into losses. Taking decision under stress or emotion should be avoided.


Keep a strict stop loss: Keep a strict stop loss for your trade and exit from the trade. It may be difficult to accept the loss, but it is part of trading.

Book the profit: Book the profit when you are near to your target and wait for next opportunity.

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