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Few Tips to Avoid Risks in the Stock Market

Stock trading has its risks. But there are some simple methods that can reduce the amount of risk significantly. A smart trader will always try to eliminate as mush risk as possible with good trading strategies. Here we are offering some useful tips that will help to avoid risk at stock market.

Choose fundamentally strong stocks – The best way to reduce risk from stock trading is to make safe investments at stock market and for that your need to pick up stocks that are fundamentally strong. So you need to invest in companies that have high earnings, low debt, and good asset value. You should always invest in companies that re posting good profit consistently. So you need to keep watch for the quarterly and annual reports of the companies so that you can determine which companies to invest.

Do not trade against the trend – The stock market goes through different phases at different times that are also termed as the stock market trend. As a trader you must not try to trade against the trade as that would only increase your chance of losing money at the stock market. You should remember that it takes time to go through one trend and start other. So depending on which trend the market is going through you should plan your trading.

Do not follow the crowd – Take your own trading decisions, based on the result of the analysis and your trading strategy. Remember that blindly following the advice or tips that are available everywhere is not a sign of a good trader. You should invest in stocks that you think is right. While trading you should concentrate on the performance of the stocks and not on the promises that they will do good in the future. You should not invest in a stock simply because your friends or colleague is investing in them. Remember each investor has his own plan and objective and trading strategy that might not the same as yours. So take your trading decisions based on your analysis and do not get influenced by others.

Make good use of the stop loss technique – Stop loss is a technique that is used by smart traders while placing a buying or selling request. While placing the order, if you mention a stop loss, the system will always close the position whenever the stock reaches that price. In that way you can ensure that your loss is least. For example you have a speculation that the stock will rise at the market, but for some reason the stocks performed badly, if had a stop loss request it will automatically sell the stock that will prevent further loss of money at the market.

Diversify your portfolio – This is a smart of minimizing your risk at the stock market. If you invest all your money to a specific stock or in few stocks from a specific sector you run a greater risk. This is because if that particular stock or sector fall at the market you suffer huge loss and you will not have any other option to make up for that loss. But if you can choose potentially good stocks from sectors and invest in them, you will have the options for making up the loss in one sector or two from other stocks in your portfolio. So diversify your portfolio to effective reduce risk.

Do not fall in love with stocks – As a trader you should never fall in love with the stocks, even if the stock had earned you great return in the past. While trading stocks you should only pay attention to the numbers and charts and not your emotions.

Impact of Oil Prices on the Stock Market, When Gas Zooms, Stocks Reach the Abyss

Anyone who has cared to study the market for the last ten years or so would be able to see that the impact of oil price is inversely proportional to the stock market indices.

In other words, whenever the oil price shoots up, the stock market consistently goes down. And the opposite is equally true. When prices go down, it is time for the stock market to rise. At least that’s what has happened for the last several years or so. But does this mean that the impact of oil prices on the market is a predominant factor for all commercial transactions in a country? The answer could be both “yes” and “no”.

Let us start with the yes part first. Movement in oil prices undoubtedly creates uncertainty in the stock market for the simple reason that, the former upsets the entire market trend that includes all types of transportation, manufacturing processes and it also often halts industrial growth to some extent. And this in turn, affects the life of a nation in an adverse way.

How Does the Oil Price Affect the Stock Market?

Price of oil affects the price of stocks in several ways.

When the oil price goes up, it usually leads to inflation. For the business, this means increased expenses to procure goods that go into the production process. Increased transportation costs as the goods are shipped. Increased marketing costs because the distributor expenses are also up. And even the advertisers might be charging more. So the entire economy becomes more expensive.

Inflation because of oil price hike is a problem for the sales team too. Consumers have less money in hand because they have to spend more on essential items. Because of this the demand for the produced good goes down.

Thus we see when the price of oil goes up, the expenses are increased, but the incomes are reduced. This naturally is a serious problem for the business. The stock market and investors understand this, and businesses across the spectrum lose value.

The stock market may move in the opposite direction to the oil price, but it does not happen the other way round. In other words, the price of stocks has no impact on the crude price, even though a lot of oil companies are also traded in the stock market. The oil price is controlled by the OPEC countries.

Is the Entire Stock Market Affected?

However, fluctuations in crude prices need not necessarily affect the stock market in its totality. Some stocks are affected more than others always. For example, the prices of stocks of automobile companies, consumer durables, entertainment and hospitality businesses, TV manufacturers, those making electronic gadgets are always affected more than others.

Of course, it affects the financial sector too. This may include banks, investment institutes managed by government or quasi-government bodies, real estate, insurance companies and others. In course of any oil price hike, it may be prudent to hold on to energy stocks.

It does not even mean that all companies in these sectors will witness a drop in the price of their stocks. Often, if there is an inherent demand for the stock of a particular company, it will rebound quickly and may even surpass the high price from where it fell.

Stock Markets – Be a Smart Investor

Stock markets throughout the world are well known for their volatile nature. There is no person who can dismiss this true fact about the stock markets. This is perhaps the beauty of stock markets, worldwide. Stock markets are well known for the sudden surge in a short span and sometimes dip down infamously. But with proper knowledge or else guidance about the markets along with nifty tips will definitely help in making profits within no time and with minimum risk factor.

A rookie or a veteran, everyone knows that the timing of the investment is the most essential factor. This is one of the most crucial share market and nifty tips for success in Indian Share Markets. As an investor one has to dedicate ample amount of your time, resources so as to understand and analyze the current market trend, pattern of investments and nifty tips. With proper knowledge and understanding of the technical patterns of the share markets one then think of any investments or profits.

For a healthy gain from the markets one has to have up to date knowledge and must involve himself in daily market research so as it will help you in coming up with some new nifty tips which works efficiently. All of these nifty tips won’t just make you reap profit; moreover it will give you an edge over other investors. With the help of certain time-tested, reliable techniques along with your expertise will help you hold on well during the panic share market situations.

With all the expertise and knowledge one must take care of the Option tips too. Well with future option tips one can make the best way to involve in the future markets for trading. The best art of Option tips are that when it is used, there is quite a less amount of risk and volatility involved. So there are quite different types of Option tips better known as Call option and Put option.

When you are trading in the market and you think that the underlying price will move higher, then one opts for the call option. If the underlying price will move lower then select the put option. These are some of the important option tips aspect with regard to the market.

Another option tips is when one pays some price while buying an option then it is known as premium. These options have an expiration and hence only last for a specific time period. Holding of Options for a long time is not possible. Choosing future and option tips will help you manage your options in a very systematic way. Dealing with the market may look pretty easy and profitable but the true fact is that stock markets aren’t an easy place to be in. One can gain millions and also lose billions in a single day. It is just that the right timing and knowledge of the stock markets along with the nifty tips are very crucial and it is the deciding factor for every profit gained.