Monday, June 24, 2024

How can retail investors avoid the risk of a crash?


Avoiding a crash is a skill that every investor strives for, and it is also a very fortunate thing. By mastering the following techniques, it may be possible to avoid a crash.

1. Don't buy bad stocks, don't buy bad stocks, don't buy bad stocks. Important things should be said three times. The most important reason for a plummeting stock is poor fundamentals and poor performance. Staying away from bad companies is also the most important principle for avoiding a plunge.

2. Avoid investing in companies that lack integrity. Before buying a company's stock, it is crucial to thoroughly research the company's past for any instances of illegal or unethical behaviour. If such behaviour is found, do not invest in the company. A company that lacks integrity will likely repeat such behaviour. Once you discover a lack of integrity, it is essential to decisively abandon any investment in that company.

3. Don’t buy stocks whose performance has declined significantly. Before buying a company's stock, take a look at the stock's performance in the last six months. If there is a sharp decline in performance, it is recommended not to buy it. A decline in performance is the trigger for a plunge.

4 .Avoid investing in stocks where executives are significantly reducing their holdings. Before buying a stock, check if there have been instances of executives selling large amounts of the company's stock. If executives are not optimistic about their own company's stock, why should investors buy it?

5 .Avoid investing in stocks of industries facing government suppression. If a government policy targets a specific industry for suppression, investors should not go against the tide. The adage "investing should follow the party's lead" holds true.

6. Avoid investing in stocks that have already experienced significant price gains. If the stock you're considering buying has already seen a substantial increase in price, it's generally advisable to avoid it. This is because stocks that have soared often experience subsequent plunges.

In terms of trading strategies, consider the following additional points to more effectively avoid a market crash:

1. Position Management: Avoid full position trading. In general, maintain a maximum position of no more than 50%. With a total investment capital of 100,000 rupees, in principle, do not hold stocks with a market value exceeding 50,000 rupees. If a market crash occurs, not being fully invested will mitigate the impact.

2.Stop loss.

Setting up a good stop loss level is a good way to reduce losses in the face of a crash. When the plunge starts, if you set up a stop loss and get out immediately, you will be safe.

3. A warning sign of a continuous decline. In general, if the market or individual stocks experience a sharp decline for three consecutive days, it is very likely a warning sign that the trend has changed. It is necessary to clear out positions immediately to ensure one's own safety.

Plunge and life.

Life is like the stock market, and the stock market is like life.

A sharp decline in stock prices can be a very frightening experience for investors and it can also lead to significant financial losses.

A sudden plunge, in our lives, refers to unfortunate events that happen unexpectedly, such as a serious illness in the family or a traffic accident involving a loved one. In the face of these sudden and major unfortunate events, we need to stay calm and brave, we need strong emotional control, and we need to think calmly and deal with the unfortunate events in order to minimize the harm caused by the events.


  • Blogger Comments
  • Facebook Comments

0 facebook:

Post a Comment

Item Reviewed: How can retail investors avoid the risk of a crash? Rating: 5 Reviewed By: BUXONE