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Stock Trading: When Risk Isn’t Worth Taking

Of course, when you’re trying to build a high-value investment portfolio, risks are part of the game. In fact, they are essential to make highly profitable trades.

After all, conservative moves have hardly produced a great result.

So, as a trader, in order to take your returns to the next level, you must be open to take risks every so often.

But here comes the punch line: Such risks must always be calculative. Moreover, the expected return must always outweigh the risk value.

But here comes the punch line: Such risks must always be calculative. Moreover, the expected return must always outweigh the risk value.

Sadly, for the sake of taking risks – and often in their chase for big money – many traders take some rather absurd and uncalled risks which eventually hurt their portfolio and put a stop in their growth.

If you’re a stock trader, it’s important that you recognize signs and understand that a particular risk isn’t worth taking. Empirically, you can use the risk/reward ratio here. You can even review your risk management plan to see where the risks you’re about to take fit.

And using several other technical analysis tools that you’re handed in any good stock market course, you sure can identify if the risk is worth taking.

However, at times, even such tools can fail. And this is where you must look at the broad factors to really audit if you should give that decision a green or red signal.

Are You Financially Healthy To Cushion Such Risks?

This is the first and foremost thing to consider. Even when you’re very analytic and quite sure of high returns, it’s not always a good decision to take the risks when your financial health isn’t positioned to cushion any possible loss.

So, give your financial standing a close scrutiny. Do you have enough capital reserve? Can your portfolio survive any possible loss?

Answer such critical questions.

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Do You Have The Necessary Trading Experience?

This is another important factor that the beginners, in particular, must be watchful of. If you’re new in the game, even with all the return probability, you’re better avoiding any risk.

In the beginning, playing safe for a bit until you get the hang of the game is a good idea.

Remember, the equation is quite simple: The more experience you have, the smarter you will get in your trades.

So, if you lack the necessary trading experience, if you don’t know anything about technical analysis like Triple Bollinger Bands strategy – be cautious and avoid getting in any high-risk high-reward trades. Watch the market and learn.

Did You Consult An Expert?

To be a successful trader, walking alone isn’t necessarily a very wise option. Having a second, third and fourth opinion of someone qualified and experienced is a wise move.

Before taking any big risk, you want to be as sure as possible.

So, consult a trading expert. Leverage on their experience and market understanding. Get to know their opinions and point-of-views. And only then make the right decision.

If you didn’t consult someone qualified and are wondering if you should make that risky trade, you should usually avoid taking that step.

Conclusion

Never take any rushed risk in your quest to time the market. Do not make the decision, because others are doing it too, without running your own analysis.

Taking risks in trades is important. But it is the calculative and timely risks that would unlock you better opportunities and help you expand your portfolio.

So, before making any jump, be certain if the risk is worth taking.

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