Building a trading portfolio: When to run from a trade, when to take profits in trading

Discipline, emotional management, and mitigating investment risks are among the key considerations when investing in all types of stock, whether online or offline. It all comes down to the management of stocks and portfolios. In developing manageable, diversified, and well-rounded portfolios, some critical considerations are discussed in the article because that is where trade and exchanges get complicated. Position management should be done diligently, removing the aspect of emotion or making it as little as humanly possible. Loses are inevitable in all trades and exchanges, but preserving capital to increase returns to the existing stock and portfolio requires following instinct for joining the winning ride. One of the common mistakes for both advanced and novice traders is buying a stock that has fallen, disguising behind considerations that the trades are cheaper or have a higher value compared to the importance of stock purchased in earlier times. The mistake is costly and has been identified in trading as one of the easiest ways of losing money in the stock market and trade. To avoid losing additional money, experts in trading propose that selling the losing trades and keeping the winning ones as long as they keep winning is a better strategy for reaping benefits in trading. 

Market psychology

In the psychology of trading, there are different lessons that can be learned and used by advanced and new traders to maximize their profits and reduce on the losing. Some of them can be defined using vocabularies explained below;

  • All-time high- this is referred to the highest prices by any asset and referring to trade are the highest prices in an open market. All-time high situations simulate investments, and traders should be watchful of any signs of losses; in this stage, much profit can be taken. 
  • Long trade- the word refers to a situation where traders decide to purchase assets and hold them until the prices of the assets can go up, and traders can sell and get their benefits. Long-trade and short trade are used alternatively, and fast marketing refers to a situation where traders borrow and sell assets, hoping the prices would be favorable enough to buy the support when the prices go down. 
  • “I knew it” is a word that all traders use at some point when stock prices keep going down, and traders keep losing money. In this stage, traders are advised to remain calm as any decisions might affect their future trading. Traders can opt to sell their stocks, but stock prices keep fluctuating, and to avoid any arbitrary decisions, the psychology of exchanges introduces profit targets and stop loss. 

Portfolio management

Portfolio management includes managing the number of open positions and the total number of holdings. One important consideration in portfolio management is never to keep a position with such a high percentage that it affects a portfolio’s future. The mistake can be avoided by investing in different sections, limiting new buys, and selling the losing trades faster. The return in a portfolio is affected by various factors, including finding proper entry positions, having a trading discipline, and trading around core positions. Discipline, mitigating risks, and remaining unemotional are critical aspects of trading and investment. Traders are also advised to maintain calm or unbiased selection in stocks which go hand in hand with the implementation of consistent portfolio management prices, which affect the overall success. Avoiding bad behavior can be a defining edge between failure and success in investment and trading. There are different platforms for trading, and some, like The Tesler, offer portfolio management options which can help traders make informed portfolio management decisions. In portfolio management, some of the deadly mistakes to avoid include; 

  • Concentrating on a few positions or trades
  • Excessive margin using 
  • Personal love for stocks, positions, or the team in charge of management
  • Making investments in illiquid positions
  • Hubris

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Zaman Lashari
Zaman Lashari
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