STANDARD DO’S AND DON’TS

Stock Market Do’s & Don’ts

Trading and investing in the stock market come with inherent risks. To help you navigate the uncertainties and volatility of the market, we have outlined some essential Do’s & Don’ts that every trader and investor should follow.

✔ Essential Do’s

Always Trade/Invest Using a Stop Loss: A stop loss helps limit losses and protects your capital in case the market moves unfavorably.
Use Systematic Stop Loss: Always place the stop loss order in the trading terminal. Avoid relying on a mental stop loss, as emotions can interfere with rational decision-making.
Set a Target for Profits: Define a target price and place a target order in the system. This ensures you secure profits without getting swayed by market fluctuations.
Trade with a Portion of Your Capital: Never risk all your funds on a single trade. Diversifying your investment helps minimize risks and increase long-term profitability.
Stick to Risk Management: The key to success in trading is capital protection. By following a disciplined approach and systematic trading, you can achieve consistent returns over time.
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✖ Important Don’ts

Never Trade with Your Entire Capital: Putting all your money in a single trade increases the risk of significant losses. Always diversify your trades.
Avoid Excessive Leverage: Trading on margin or using high leverage can magnify both profits and losses. Use leverage cautiously and only when necessary.
Don’t Ignore Stop Losses: Ignoring stop losses or removing them after placing a trade can lead to significant losses.
Do Not Follow Market Hype: Avoid making impulsive trades based on rumors or speculation. Always conduct thorough research before entering a trade.
Do Not Share Your Login Credentials: Protect your account information. If anyone asks for your credentials, report the incident immediately.
Do Not Invest Without a Strategy: Entering the market without a clear plan increases risks. Always have a well-defined trading or investment strategy.

📌 Example of Risk Management:

Let’s assume a trader has a capital of ₹10 Lakhs. Instead of investing the entire amount in one trade, a safer strategy is to invest only ₹1 Lakh per trade. This way, if the trade does not go as expected and the stop loss is triggered, the overall impact on capital remains limited. Over time, this approach helps in increasing the probability of making profits while reducing potential losses.

By following these essential guidelines, you can improve your trading strategy and safeguard your investments. Trade wisely and always prioritize risk management.