Those who are starting to invest in the stock market or who already have experience in this field often seek advice or comments from experts to try to find a formula that helps them become traders and obtain profitability from their investments. Although there is no perfect recipe, there are some practices and aptitudes that can bring our goal closer. All of them are included in this decalogue to invest in the stock market safely and calmly.
1. Master your stress. The first thing to learn to invest in the stock market without any scares is to control stress and emotions. It is precisely under stress when traders make more mistakes and increase the risk of losing their capital. Knowing how to manage stress and emotions is the best way to avoid losing money in the stock market.
2. Diversify your portfolio. The popular saying of not putting all your eggs in one basket is particularly true in the stock market. Diversifying the portfolio means investing in different financial assets: stocks, commodities, currencies, indices, CFDs, etc. Investors who lose money are often those who only invest in one market, for example in Forex. In the stock market you can also diversify your portfolio in terms of business sectors or geographical areas.
3. Define your profit targets and your loss limits. Many novice traders do not spend the necessary time establishing their profit and loss targets. However, this is an essential element and dispensing with it means exposing even more of the capital we have. The losses suffered by novice traders are often a consequence of the absence of a trading plan. This plan should include our profit target (take profit), that is, when to exit the market: it is advisable to close the position when we reach the set goal and not take unnecessary risks trying to maintain it. Equally important is the loss limit (stop loss) so as not to risk more than we should.
4. Establish your investment horizon. To invest in the stock market limiting losses, it is essential to define an investment horizon, that is, the period of time during which we will maintain the position. It is imperative to establish this horizon from the beginning and not turn a lost short-term strategy into a long-term strategy.
5. Choose interesting assets. To win in the stock market, keep in mind that luck is not a strategy. Therefore, it is necessary to carry out an in-depth analysis and look for the least valued assets. In fact, it is on undervalued assets when profit expectations are more interesting.
6. Do not invest more than you can afford. This may seem obvious, and yet, every year in the market many novice traders end up ruined. This is the golden rule of any investment: one should invest in the stock market only the money that one can afford to lose. In other words, you should not invest all your savings or even your preventive savings in the stock market.
7. Avoid trying to 'make up'. 'Make up' is a common expression in the world of finance. It is about recovering losses quickly, often with large operations. Although it is normal to want to cover losses, trying to make up quickly will put the trader in a stressful situation that will lead him to make bad decisions. It is also important to know that returning to the level of capital before the loss requires greater gains than this.
8. Analyze the markets. Investing in the stock market requires time, especially to analyze the markets, regardless of the assets in which we operate and the strategy we choose. If long-term trading is based more on fundamental analysis, very short-term investment, such as scalping, requires good technical analysis.
9. Consider the return / risk ratio. This relationship helps to know what to expect in terms of benefits. The riskier an asset is, the greater return it will give us.
10. Train with a demo account. If you follow these tips for investing, you will considerably limit the risk of losses. The last tip is to put it into practice by training with a free demo account. This way you can learn to trade if you are a beginner or test new strategies if you have more experience.
