A proper trading plan is very important for success in the stock market. There are many ways the trader’s trade in the Equity market. Some use technical analysis and others use the support of the advisory firms to trade effectively in the stock market. Whatever may be the trading plan the principles of Risk Management and Money management are very important for the success of any. If a trader is following the principles of money and risk management there are high chances of his success.
Besides the regular procedure adopted by the traders, the principles of money management and risk management can be very useful in achieving the overall success in the stock market. The principles of risk management are followed using the tools like stop loss. The stop loss is used to exit from the trade if a loss is incurred. The stop loss helps the trader to incur a minimum loss and exit the trade if the market goes in the opposite direction from expected. The stop loss can be applied to both the buy and sell trades.
The stop loss is applied below the buy price if the buy trade is initiated and is applied above the selling price if the sell trade is initiated. The proper levels of stop-loss are also important for incurring good profit and to avoid unnecessary loss by regular price fluctuations.
The principles of money management are also important along with the principles of risk management. Money management involves the proper allocation of the funds. It also deals with a diversification of the portfolio and investment options. Also, a proper calculation of the profit or the loss incurred in the trades and the goal of the trader can be done by the money management principles. These principles followed along with the accurate stock market tips from the reputed advisory firm can lead the trader on the path of success.