Friday, June 21, 2024

How can retail investors control stock market risks?


"The stock market is risky, so invest with caution." This is a phrase that everyone has heard and most retail investors should be aware of it. But how should we deal with these stock market risks?

First, be prepared: No matter when, before buying stocks, you need to figure out why you are buying them and calculate your target selling price. Never buy blindly, wait blindly for the price to go up and then get trapped blindly.

Second, be sure to set a stop-loss point: All those who experience huge losses did not set a stop-loss point when entering the market. Once a stop-loss point is set, it must be executed. Even if you are stuck in a stock right after you buy it, you should sell it if you find you are wrong. Long-term investments must be in stocks that can go up in the long term and have strong fundamentals. Once the long-term trend breaks down and falls, they must be sold!

Third, don't be afraid of a drop, be afraid of high volume: It's not scary when some stocks fall for no reason, what's scary is a sudden increase in trading volume. Especially for stocks where the main player has a large holding, there should never be a huge trading volume. If it does appear, it is highly likely that the main player is selling out gradually. Therefore, you should be extremely cautious about any sudden increase in volume under any circumstances.

Fourth, to control risk, you need to control your position first: In the stock market, there is no need to trade all of your capital at once. Rational investment and reasonable position control are the only ways for investors to avoid risks and develop good trading habits during trading.

Investors often come to the stock market for profit! They are blind to the risks and only see the potential to make a lot of money. But the reality is that as soon as they buy, the price falls. As soon as they sell, the price goes up. I often hear netizens say "full position trapped" or "full position bottom fishing". My point of view is: ten full positions and nine losses, never full position. There is a word in English called hardly, hard means "hard work" (positive), but hardly means "almost not"; why? Because when the elastic band is stretched too tightly, it is not far from breaking. The most difficult thing in stock trading is not technology but position management.


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