If you want to invest in the stock market without losing money, it is imperative to have a trading plan with money management (risk management). Like a boat that sails during a storm, you need to know where you want to go with your investment. What is your investment plan based on the different market configurations?
Having a profit and loss goal on each trade is very important. It is a habit to adopt in your plan to avoid significant losses in online trading. As you upgrade computer hardware and make your system perfect for the work, the choices become fruitful.
When you have reached your earning goal and it is important:
- It gives a signal to exit the market (you have reached your target) to cash in the gains.
- It limits the trader’s greed, because wanting to earn even more can leave you with regret. Be aware that financial markets don’t go up forever.
When you have set a loss target and it has unfortunately been reached:
- It avoids significantly increasing your losses.
- It helps you keep your investment within the risk limits you have set.
Invest in the stock market – Define your investment horizon
If you want to invest in the stock market without losing money, you will need to define an investment horizon. An investment in a PEA requires an investment horizon of 8 years if you wish to benefit from the tax advantages. Scalping has a maximum investment horizon of 5 minutes.
- It is very important not to confuse the short term with the long term. Why ? Because the tolerance or aversion to risk over time is different even if the financial goals are common.
- Placing a stock market order with a three minute time horizon while trading long term is not compatible. In short, long-term trading is especially not done over short time horizons by dragging losing positions.
Day trading involves buying and selling a financial instrument on the same day or even several times during a day. You have to know how to take advantage of small price movements to create a lucrative dynamic. But it can be a dangerous game for beginners or those without a well thought out strategy. You have to do your research and be familiar with the financial markets before you start. Plus, day trading is a job, not a hobby. So treat it like it is, be diligent, focused, objective, and let go of your emotions. In this article, we will help you decipher day trading.
Remember that you will also have to pay taxes on any winnings made. So, in the end, what you earn is not the net worth of what will be left in your wallet. Be aware that some losses may wipe out all your winnings.