You may have heard this millions of times before, but the main thing you need to remember when trading a share price is not to lose, simple? Not when your trading with real money. So what steps can you take to make sure you don’t lose money? Read on.
So you have bought some shares, you follow the share price closely, and then the share price moves up. Great, so now you need to decide whether you hold this trade, or cash in now. With some good brokers you can set a level called a stop loss at which they will execute a transaction on your behalf. So, you could set up a stop loss at breakeven level. This way if the share price moves back at least you have reduced your risk to zero (minus any commission unless you factor that in).
Then look for a target level to take your profit. You should have really thought about this before you bought into this share price. What level do you see value at based on the company’s fundamentals? What was the previous high share price over the last year or two? These are all ideas for taking your profits.
Remember, you have to take a profit or you will never get anywhere trading a share price.
So the next scenario is this, the share price moves sideways or even downwards. Well this means your capital is tied down for weeks or months, even years if you are daft enough not to employ a stop loss. The best investors sell their shares to cut any losses. Losing traders hold on for glimmers of hope, maybe for years, unwilling to take a loss. If it remains a paper loss, it is still a loss (do not be fooled) as you can’t use that capital to trade the next share price you find which is interesting.
It is possible to protect your capital, but you need plenty of discipline to ensure your money continues to be safe. If you follow the next steps it should help you safe guard your investment and give yourself a chance of making money.
Always try to invest in an industry that means something to you, something you know a bit about or a company that has you intrigued. Good sectors to invest in are food, Oil, Financial, Airlines. Try to research the potential of the company for the next 5 to 10 years. Most sectors have been around many years and will still continue to do so. When you buy into a share price, you are not just buying a share! It is putting money into a company which you want to see expand and make profit. Try not to think short term, look at this investment over a few years, even 5 to 10 years.
Hopefully this advice will help you a lot in your choices of shares to buy. Please always research companies and their prospects, and read the news. Your own decisions are always the best ones.
To get the latest share price for Barclays, Lloyds, RBS and other UK companies then visit Live Charts UK and follow their share prices each day in a free watch list.