The Most Important 7 Steps That Help You Achieve Profits From Trading In The Stock Exchange

Shares are part of the company's ownership that individuals or investors can buy, and the process of buying and selling shares through the stock exchange is one of the most important investment tools, but the fear of loss always prevents investors from reaping profits from trading operations on the stock exchange.

Learning trading, speculation and investment tools gives investors the necessary confidence to break into the world of financial markets and reap profits. A report by the American "Investopedia" website monitored the most important elements that an investor must learn in the stock market to manage risks.

One of the most important elements that a successful investor should pay attention to is avoiding the mistakes that many speculators make, such as buying shares for more than you can bear.

And financial markets of all kinds contain a large degree of risk, and therefore the purchase volume must be calculated and not invest all your money, so as not to be surprised by an unexpected emergency change and the index drops unexpectedly or any personal incident that forces you to withdraw a quantity of your money, and here You will inevitably suffer a huge loss, and the main reason will be that you did not determine the appropriate situation for your purchase of shares and determine the size of the loss that you can bear before you start.

How to manage trading risks
One of the most important steps that you should start with is identifying the most important factors or risks that you may be exposed to.

Identifying these risks will make you think about developing a backup plan, which will give you the ability to act if these risks become a reality.

You must also bear in mind the political risks that often negatively affect the financial markets and stock exchange speculations.

1% rule
In short, this rule says that you should not put more than 1% of your capital in a single trade, and this will reduce the amount of risk that you may be exposed to.

center size
According to the 1% rule, if you have $1,000 in your account, you should not place more than $10 per position.

The key to making a profit with the 1% rule is the number of winning trades, not their individual amount.

For example, aim for 5 winning trades, where you risk 1% on each position, instead of 1 winning trade, where you risk 5% of your capital.

In the long run, you will have better chances of taking profits and preventing large losses.

Some traders modify this rule by increasing its limit to 2%. However, this is usually not recommended if you are a beginner or a trader who is still building and testing his or her risk management strategy. In short, the idea of position sizing is simple; Never risk too much capital in one trade.

In another report, Bankrate reviewed the most important steps for beginners to invest and speculate on the stock exchange:

Explore before investing
Obtaining information is one of the most important steps to success for any novice investor.
You must consider the company you are investing in as well as the industry as a whole. Therefore, the collection of information must be comprehensive in order to be effective in order to know how to invest in the stock exchange. What is the point of analyzing a company's numbers and strategy if you have no idea what you intend to compete with?

Invest for the long term
It is always better to invest your money for the long term. Numerous studies tend to show that the risk of loss decreases significantly with an increase in the investment horizon, even taking into account the collapse of financial markets in times such as war, economic or health crises.

Determine the degree of risk
This point requires real work to know your financial dimensions. You need to take into account your degree of risk aversion, as well as the investment horizon you want to orient yourself towards. If you want to choose the short-term investment, know that volatility is higher there. We always advise you, in order to diversify risks, to also invest in long-term financial products.

Learn "Stop Loss" and "Take Profit"
When you invest, it is important to set limits for all scenarios, whether in the case of profit or loss. These guarantees make it possible to rationalize your investment, thus avoiding panic movements. By setting limits even before investing, these limits are 'Stop Loss' and 'Take Profit' orders.

And if you stick to the previous point, there is theoretically no reason to panic, even if you are a novice investor.

Also, try to remember that the position that suffered a loss must see a larger increase. For example, a position that has fallen by 20% must see an increase of 25% to return. For a position that loses 50%, it requires an increase of 100% to return to its initial level. And always keep this in mind.