Risk Management – Friends, before entering any train, we should know about our risk. Because without any trouble, we will wipe out our capital very quickly. So for this, I will tell you today how we can manage our risk and money.
Many people take risks on their entire capital while trading. This is dangerous because taking such a risk can make you zero from the bank. This means he can bankrupt you. The characteristic of a solid risk-return correlation classifies stock investments.
Higher risk means a greater return and vice versa. Risk management identifies and evaluates potential risks and develops strategies to earn maximum returns.
In other words, friends, risk management is not a technical analysis or rocket science. It’s just you have nominal control over yourself while trading with Risk Management.
How To Do Risk Management –
If you’re doing entertainment, you’ll need to split your capital into several parts. Spouse, you have ₹ 60000, then divide it into three parts. And now you have to take the risk of less than 3% above 20000.
This means you will only take the risk of ₹ 600. You will close your trading setup if you have a loss above that. You made a profit of ₹ 600 on that day, and now you have to take one more trade. Then you have to take 50% of the profit that you have earned.
And the remaining 50% you have to take to your home. What will happen with this is your mindset will be a perfect build. A trader should never risk his entire capital because the market is always ready to liquidate it with proper Risk Management.
Whenever the trader takes a risk on his entire capital, the market teaches him a good lesson.
Type Of Risk In Stock Market-
It is the loss caused to the trader or investor due to factors affecting the risk of the financial market. This is also known as System Matic Risk, and we cannot eliminate it, but we can try to control it.
Political upheaval in the stock market, risk changes in interest rates, natural calamities, artificial calamities like recession, or economic achievements, which are many factors that affect a trader in the market, give.
If any of these risk factors occur, the market will be affected simultaneously, but its effect will be different, called unsystematic risk. We can also call unsystematic risk many names like non-system, specific risk, residual risk or diversifiable risk, etc.
1) Risk In Interest Rate –
The name of this risk tells you very well whether the interest rate risk is there when there is a change in the Central Bank Announcement Monetary Policy due to any interest rate change and other fundamental factors.
Then all these come under this risk, and this type of Risk Management covers the volatility in the stock market. Which has the most impact on the Investment security bond
2) Risk In the Equity Market –
This type of risk revolves around the momentum in the price of investment instruments. If we invest more capital, then the more the trouble will increase. That means the whole game is your capital and quantity inside it with proper Risk Management.
The equity market Is a bit risky. The investor can bear the loss from the stock market because, in the stock market, there are only registered public companies whose security has been traded. Every company has its physical security. You can control your risk by using chart patterns
3) Risk In the Currency Market –
This type of risk is known as the exchange rate risk because it matches the volatility in currency trading relative to any other trading currency. Cruuncy totally depends on the economy of the country. If the economy is falling down then the crunchy will also fall down.
The main currency is the dollar. Many of country are doing business in dollars. But nowadays we realize the monopoly of dollars is reducing. Some contrary has been started the business with own currency.
Currency risk is a significant risk for investors or firms who hold assets in another country. It becomes a bit riskier as it has the potential to exhaust your entire capital within one day.
4) Risk In Commodity Trading –
Commodity risk includes volatility in various agricultural or non-agriculture such as crude oil, metals, oilseeds, spices, precious metals, cereals, etc.
It’s too much volatile and it has a big lot size. if you are trading in the commodity then you must have full knowledge of the price action and proper Risk Management
We need a lot of capital to trade in this type of asset, and our risk on that capital is more than 50 percent within a train. If we do our analysis correctly, we get a good reward. If we have not done our research, we must take many risks.