Coronavirus is now a severe headache in the world’s economy and financial markets. Most of the businesses, from the Food industry (like restaurants) to Travel (Cruise line or Airlines), have closed while people around the globe are forced to STAY SAFE AT HOME.
In such a bad market situation, risk management has become an essential component for traders. Keeping this in mind, here are the best trading tips by Stockguru.com that will help you in managing risk in the market’s madness.
❝ Why should you “Investing” rather than “Saving”? Many people like to put their money in a savings account, where they earn a fixed rate of return, However. In contrast, the interest rate on such savings is shallow, and the inflation rate (which is more significant than that of your interest rate in general) eats your savings interest rate. ❞
- Position sizing: This can be determined by knowing How much money you make? and How much do you lose? For example if you are investing $1000 in TWTR Stocks from USA Stock (Twitter, Inc), which is trading at 23.12$ (approx.) at the time of writing this article i.e 04 April 2020 1800H GMT+8. If the stock rises to 24$, then your profit will be about 37.84$, which is a substantial return. However if the stocks drop to 22$, your loss will be about 48.16$.
Therefore, a proper positions sizing strategy can help you minimize this type of loss. A golden rule is to ensure that there is a maximum of 3% of risk in your portfolio.
2. Adjust stops: A stop loss is a very essential tool to use, especially in this time where the market is very volatile. Stop loss will stop your trade immediately once it reaches your predetermined level. Still , one should always use stops loss very carefully & should also consider the market size of the intraday movements while trading A perfect way is to widen your stops to prevent your stop loss from being triggered so soon.
3. Optimizing Leverage: A very powerful tool used by most of the traders to maximize their returns. Higher the leverage Higher the profit – but as we learnt so much from Spider-man movies “Great power comes with great responsibilities”, leverage is a double edged sword, meaning higher the leverage , higher the profit and higher the risk too and more significant loss.
4. Open eyes on Open Positions: There are so many things happening in the financial market during this current crisis due to this Pandemic. More action is expected to take place in April-Mid i.e when most of the companies start releasing their quarterly results.
5.Close before weekend: To read behind the charts, keep your ears open for news. News is very essential during this period, “To stay safe, we recommend that you have access to the best news sources or signal” – says spokesperson from Stockguru.com which is a stocks alerts provider. Most of the traders are taking advantage of stocks alert from this platform to make profits in such a bad market and even investing for long term.
The COVID-19 Pandemic has brought a very volatile market, but still there are always ways to manage the risk and maximize the profits. While this Stockguru.com understands the market very well and helps traders to make more money because of the high swings, it can also lead to significant losses too.