Trading with a target
One of the things that I have learned while trading is not to be greedy. I have made mistakes where I did not exit at the right time hoping that I would make more and my profits were lower than what they could have been. Trading should always be done with a set target.
Every one has their own risk capacity and their own style of trading. I am still not very experienced with trading and that’s why I am writing posts which help me learn from my mistakes and might also help others in the process. My risk taking capacity as of now is moderate. I do not take unnecessary risks.
When one is still inexperienced in trading in the stock market or in any other market, one of the things that they should always keep in mind is to trade with a set target. It means that when one enters a trade they should set a maximum amount of loss or profit that they are willing to accept.
Lets say that your capital is $1000 and you enter a trade, you should not be very greedy and not have high expectations in the beginning of your trading journey. You should have a realistic target which is set on the basis of your risk taking capacity. So in this case, lets say you have a target of earning a profit of 3% on your capital. As soon as you reach your target the best thing to do is to book your profits and exit the trade. The price of the stock which you purchased may go higher and this may make one feel that your profit could have been higher. But on the other hand, there is an equal chance that the price might have gone down and you could have made a loss in that trade. Its always better to earn something than going back with a loss.
Now that we know what to do in case of a trade working in our favor, lets talk about a trade which is unfavorable. Lets say you have a capital of $1000. When you enter a trade you should always set a stop loss which is in line with your risk taking capacity. In this trade you might set a stop loss at 1.5% of your trade value. This can help in reducing your losses.
To conclude, I would say that a newbie trader or a trader with less experience should always keep a target in mind and enter a trade. One cannot guarantee how the trade will work out, but it is always better to be on the safer side when one is still inexperienced.
Thank you for reading my post. I hope that you found it informative. Let me know about your thoughts and feedback in the comments section. Please share it and do read my other posts as well.