5 tips to remember while trading in stocks

Business

oi-Sunil

By Sunil Fernandes

Published: Friday, November 16, 2012, 10:48 [IST]

If you are trading in the cash segment of the capital markets, here are a few tips to remember to prevent losses and make the most of trading opportunities.

1) Keep a strict stop loss

Keep a strict stop loss while trading. In a volatile market, where sensitive news could spark a sell-off, you could easily be at the receiving end. Stop loss would prevent further erosion of capital in case there is a meltdown in markets.

2) Play in high beta names that are liquid

It's best to avoid stocks that have low volumes and in which trading is thin. Also avoid stocks that show very little movement, so as to ensure that you have opportunities to make money.

3) Avoid being too greedy

If you have made a decent sum on a trade, the best would be to exit the stock and avoid being too greedy. You never know when the stock could crack and you could end up with losses.

4) Never buy immediately on market opening

It's best to avoid buying stocks as soon as the markets open, as there is a possibility that you may enter at the wrong time. Wait for the markets to stabilise and than take a call.

5) Never chase stocks on news

There are many traders who chase stocks based on tips and news. While this may work once in a while, it may not necessarily be the case, especially if the stock has already run up. Chances are you may buy before the profit booking sets in, and end up with losses.

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