April 2012 - Stock Market - Protect Your Investments!
Here is the article on how to protect your investments when the market direction is not favorable to you.
If you want to make money from stock market with good percentage with some risk so that your gain would be much higher than fixed deposit but not huge as bet as lottery. You can follow the given steps below to protect your investments:
1. Have Margin and Option (hedging and buying calls / puts only) enabled brokerage account.
2. Never borrow from your broker by trading on margin. If you have $ 5,000.00, then never trade more than 80% this limit and keep 20% as cash.
3. Avoid day trading.
4. Analyse the market and try not to put the stop loss orders. Instead consider hedging your positions.
5. Diversify your portfolio.
6. Never bet on single stock.
7. Sector wise bet is OK if you have analysed the market well and hedged your positions.
8. If you are on the profit side significantly, then sell covered calls and but proteced put options to maximize your return.
9. Trade with technical indicators but always be ready for fundamental analysis.
10. If you are on the loss on a stock, lets say by 15%, then do not buy the stock again to average down your price. It means that you are increasing your risk more and more. Instead buy the proteced put option, so that your loss will be limited.
11. Open your poistions very slowly but close your positions aggressively.