As a stock trader it is important for you to know what you should do in a stock market and what you should never do. You should be clear in both these aspects. More importantly you should be aware of what you should never attempt at the stock markets while trading.
As a stock trader your final goal is to optimize your returns and in order to achieve this you invariably require to cut down your loses while trading. So what is the most important aspect in stock trading that you have to be careful of? Don’t worry as we would show you the way to be loss proof.
One of the surest ways to avoid losses while trading is that you Don’t Catch A Falling Knife. So what really do we mean when we say this phrase to you. Yes, we will dwell on this factor and would make you everything crystal clear. Let us take an example to explain this to you.
Many stock traders try to buy stock when there is a big momentum like when stock is climbing or falling they find this as opportunity and buy or sell stock. If a stock is fall a lot in a particular day and you are hoping that this stock will climb soon and you buy that stock. The volatile stock market fluctuates and the stock prices of stock dips to close the day at a low. But you are still holding the stock with you. The second day again the stock prices falls and you still do not sell them hoping that it would gain. The third day, same scenario is repeated. So on the fourth day you are holding the N number of stock at a much lower price.
So technically speaking, if you are a trader selling these stocks now would mean that you have to suffer heavy losses on the transaction. The whole approach points us that as a stock trader you Don’t Catch A Falling Knife. Here knife refers to the stocks and falling points on its falling prices. So don’t wait, linger and hold on a stock whose prices are falling regularly. You should sell such stocks and minimize your losses and buy out stocks of some other company whose prices are on the rise. Stock traders should always maintain a stop loss for particular trade. A stock price can fall without any limit.
So Don’t Catch a Falling Knife, it would injure you and likewise being a stock trader don’t hold on to stocks whose prices are continuously falling. This way you would strengthen your trading portfolio and end up being a gainer rather than a loser.