May 19, 2024

If you an investor in equities, it indicates that you have some appetite for risks because equities are volatile assets that can dent your investment goals. However, with perseverance and good market reading, you can experience the highs too Peter DeCaprio.  When you put a trade, it will be foolish to assume that the markets would go your way all through. Explains Peter DeCaprio. Despite your best understanding of the market trends, the outcome can be quite different from what you expect, for good or bad. Instead, it is prudent to take the approach of taking risks consciously and include it in your core trading strategy. Your ability to take risks enables you to protect your money. And ensure overall profit despite the highs and lows that you experience during your journey.

 Risk management is integral to trading activities. And you must learn to protect and consolidate your position instead of just targeting to make a profit by using the available indicators.

Here are some of the best risk management strategies that successful investors would vouch for. And you can try to build your fortunes on them.

Have a holistic look at your portfolio

According to the experience of Peter DeCaprio, never give much importance to individual stock selection. Have a long-term view of your assets by making your decisions, based on asset allocation while considering your portfolio in totality. It does not matter what stocks you buy. But it matters more whether you consider investing in real estate, gold, cash. And bonds instead of equities alone. The way you allocate the assets has a much higher impact on the returns than which stocks you buy. For maximizing returns, you must widen your horizon of investment through asset allocation.

Limit losses by using stops

Stop losses are handy tools to protect you from the risks of the volatility of markets. It requires some practice of the skills that can protect. You from losses based on the nature of the commodity, stock. Or index that you are trading with when applied at the right time. Stop losses protect you against inefficient trading, too, that can make you lose money instead of gaining anything.  Although it is easy to understand the principle of stop-loss. Its effectiveness depends on knowing its technique by considering each trade as an individual entity. 

Protect your profit with trailing stops

In addition to the static stop loss discussed above, make use of trailing stops. It is similar to stop-loss but pertains to a long position. It operates in the same way as stop-loss while tracking the asset price when it is in the ascending mode. But if the asset price starts going the other way, it triggers an action to stay put.  Just the opposite happens when you are holding a short position.

Trailing stops help you lock in profit as soon as you earn it by protecting. You against moves that can damage your position. Decide on a percentage of trailing stop without being greedy.

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