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The key to have good profits while trading in the Stock Market is to devise some strategy having high accuracy. No strategy can be 100 % accurate but it is best to have strategies with good reward-risk ratio. Having good reward-risk ratio will ensure that an overall profitability is achieved over a long term.
Along with having a proper strategy, it is important that you follow the principles of risk management and wealth management to succeed in your stock market venture. Risk management is important to minimize the risks and maximize the profits. If the risks are minimum, there are chances of high profitability over a large number of trades.
The tools like stop loss can be used to minimize the risks. It is cautioned that you should always place your trades with strict stop loss. Without a stop loss, there are chances of huge losses. The market may turn completely upside down and may lead to heavy losses. The stop loss can be used in strict sense as well as variations like trailing stop loss can be used to lock the profits gained.
Many traders follow strategies which employ trailing stop loss. In case of a trailing stop loss, the levels of stop loss are dynamic and changed with the market movement. If the market moves in our favor, it may lead to locking of the profits achieved. The market volatility is responsible for considerable price movements of various securities. One can take benefits of this inherent volatility and devise some strategy, to gain good profits daily.
If a trader is making a profit of 0.5 % consistently, it can be termed as a good profit. You should make a good research of the strategies available in the market and choose the strategy which suits your trading style. Also, it is advised that you back test your strategy before using it. There are many tools available online, which you can use to back-test your strategy.
Once, you are confident of your strategy, you can employ it in the live market and with real money. Before this, you should practice trading on some demo account. You should invest real money in trading only when you are confident that you can earn good profits from it.
Thus, in this article, we have seen key tips to trade effectively in the stock market. It is a fact that many people try their hands with stock market trading but most of then fail in their venture. The best way to succeed in stock market is to gain good knowledge about the working of these financial markets. Once you own a good knowledge about this particular domain, you can take good decisions and can trade effectively.