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Avoiding Losses During Margin - Trading |
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Margin Trading is one of the easiest and the quickest ways of making money in the stock market. Most traders concentrate more on Margin Trading as the investment is quite less and they can make quick money. |
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| Author: Rhi Johnson |
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In Margin Trading, at-most care should be taken in order to avoid losses, as the losses will be quite heavy. People can even lose all their money in Margin Trade.
Follow Stop - Loss strictly and do not give room for any huge losses. As soon as you buy a stock, place a Stop - Loss trigger for your stock so that you can exit at minimum loss, even in the worst situation.
When the stock price goes below the buying price, do not wait for the stock price to go up again. You may wait indefinitely and end up in huge losses. Stop - Loss will help you to get out of the stock with a minimum loss.
As soon as the stock price goes above the buying price, revise your stop - loss to a slightly higher price so that you can get at-least a minimum profit when the stock price decreases from there. For example, you buy a stock for Rs.100. Initially place a stop-loss at Rs.97, so that, when the stock price decreases you will lose only Rs.3 at-most. When the stock price goes up to Rs.105, revise your stop-loss trigger price to Rs.103. so that you will get a profit of at-least Rs.2.
Revise the stop-loss trigger price constantly as the stock price increases. Do not expect the stock price to increase endlessly. You may end up in nothing. So, be careful with the stop-loss trigger price and exit the stock at the right time.
When the stock price decreases and if you have sufficient funds, you can convert the stocks that you have bought via Margin Trade into Delivery. In this case, you have to pay the full amount for the stocks and you can sell them when ever you want.
For more information about managing your money visit Successful Margin Trading.
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