How to Minimize Loss in Stocks
Exploring the world of stocks is not only about how much profit you can get. But you also have to have the art of losing in stocks.
Especially for a novice trader, your main target is to learn to MINIMIZE LOSS instead of getting as big a profit as possible.
Remember that, Stock market is risky. If you can enjoy it, then the opportunity to make a profit will definitely be wide open. How do you lose shares?
In this post, I want to share based on my experience on how to lose in Stocks (other colleagues may also have their own strategies). There are three ways I use to lose in stocks:
1. Apply 80:20 or 100:0 . Stock portfolio composition
The composition of the 80:20 portfolio means choosing 80% of stocks that are liquid and worth trading, and 20% of third-tier stocks (for those of you who want to try to learn fried stocks).
While the composition of a 100:0 portfolio is that you place 100% of your shares in liquid and tradeable stocks, and do not buy fried stocks at all in your portfolio.
You can here learn how to screen Stocks to find a stock pick that is worth trading: A Simple and Effective Guide to Choosing Good Stocks.
With this formula, you can prioritize choosing stocks that are low risk and safe to trade, so that your floating loss risk can be minimized.
In practice, I often find traders with small capital who often buy lots of fried stocks and warrants, and in the end not a few traders whose shares are stuck, cut losses in large amounts until their capital runs out.
Therefore, to overcome losses, you can try applying a portfolio composition such as (80:20 or 100:0).
2.Use small capital for trading
"The greater the capital used, the greater the profit in the stock". This sentence is often used as a recommendation for traders who have not been able to make big profits in
I agree but of course this can be applied if you are experienced in trading. If you are still a beginner, using large capital can increase trading risks.
Because the greater the capital you use, you must be able to manage psychologically well. Traders who are still learning to choose stocks, also have the potential to be wrong in choosing stocks and trading indicators, so if you use large capital, of course the risk of loss will be even higher.
The solution, especially for stock losses, you can start with small capital first. small capital of around IDR 1-3 million for trading and taking actions as in the first point.
Also read: Ideal Stock Trading Capital. As your trading experience increases, you may consider increasing your capital.
3. Prioritizing selected stocks
For those of you who have been trading for several months, you must have experienced profit / profit. Stocks that have already given you an advantage, you can consider prioritizing in the trading list.
If you manage to analyze a Share and you can profit from the Share, it means that the Share is a Stock that you understand the technical pattern of.
In other words, they are stocks with little risk to you. By choosing stocks that suit your character, you can find out the risk of buying stocks that are not moving well, so that stock losses can be minimized.
Colleagues who feel that trading is still in disarray, you can re-evaluate whether you have prioritized stocks that are worth trading and develop good capital management.
These things are the determining factors so that you can experience losses in stocks.
