Stock Market Profits – Limiting Market Risk

No matter how much you might detest it, money, or some equivalent thereof, is the driving force that makes the world go around. No matter how much they may know about financial markets or business economics, each and every investor that is active in the market today is interested in making stock market profits. You may have heard older investors say that the only rule you ever need to follow in the stock market is “buy low and sell high,” but if you’re going to turn your investing into a profitable venture, you also have to know how to limit your risk and make the most of timely opportunities.

One of the most common misconceptions about stock market profits is that there is a secret formula for making millions of dollars just waiting to be discovered. New investors are always so full of optimism and excitement about their new trading venture, they never stop to think about the fact that if they are going to make money, it will mean that they are accepting the risk that they might not make any money on the stock market at all. The market is always a gamble, and anyone that tells you they have it all figured out, just hasn’t had a dose of reality yet.

It’s important for new investors to realize that the ability to make stock market profits is totally reliant on being able to analyst the natural up and down movements of the market, and interpret the trends and patterns that you find there as clues about what those same stocks are likely to do in the future. This is the practice of technical analysts, who spend their days tracking and charting price movements, looking for trends to form, and for patterns to interrupt, continue or reverse them.

Another way that you can increase your chances of making stock market profits is by doing everything you can to limit the risk that you might lose money. You do this by committing to research and thoroughly understand every stock of every company in which you consider investing. Understanding the concepts of market pressure, economic health, volume and motivation will also give you a better understanding of why the market operates in the cycles and phases that it does. This will allow you to choose stocks that have the potential to weather these fluctuations well, and continually move in a generally upward direction.