How to choose Profitable stocks and managing risks of loss

The ultimate goal of any trader is to produce a level of profit that is sufficient in the light of risks associated with the struggle. Before you buy a stock option it is important that you consider the basic things like financial stability of the issuer company, the potential of the stock to perform to in the planned time frame and expected earnings and its ratio to the market price of the stocks.

Looking closely the position of the company is the first move towards ensuring that you are investing in the profitable stocks. The companies on the sound financial footing would have a recognized track record, active market of its products and services, competent management and steady and increasing rate of dividends. Assessing the company is the first basic thing to ensure your investments would generate returns.

There are other factors that help you ensure you are investing in profitable niche. This price to earning correlation of the share. This means how much you are going to pay for per dollar earning. Before investing take few companies and compare their PE values to jump to most high earning stocks. Below is precise of example of how to analyse PE ratio of companies.

You pay $8.75 to earn $1 in AB, so YZ Company’s stock show potential of high returns.

The period for which you decide to hold the investment is the third most important in our list to get profitable returns. If you are going to invest in the long run then the stocks should be of companies who are sound and show some consistent financial performance and hold steady and good percentage of market share.

Managing Risks

The investment whether profitable or not is always susceptible to certain level of risks. What we can do is only take steps to minimize it by visualizing the future based on our past experiences. No one give absolute surety about the safety of your money. Picking for high earnings stocks are not easy to find. You should put some time and efforts on some other areas of stock trading like time of trading, your life style, and selecting a broker that best serve your style.

If you have made your mind set of day trading this means you need to give most of the hours in from of your computer. To reduce the stress and extent of trading you need to increase your time to weekly or monthly trades. If you are a day trader you need a broker with direct access and expedite facilities. The costs of trading, fees and commissions are high when it comes to day trading.

Most of our friends in stock market image it is as a golden mine. We cannot exactly control all the landscape of stock trading and know the when we will make profit and when we will experience loss. Only thing we can do is to control their extent by taking some precautionary measures and trade with risk cautious mind. We can take help tools like position sizing, stop orders, and risk management.

Among all the risk factors the key to stay away from losses is self-control. Never let your emotions to overcome your practice rules and plans. Being out of control as we see slight price changes keep us away from making smart level of profits. If we cannot overcome our feelings, other tools and tips are less likely to take us to success. The best way to control ourselves is by making specific rules and following.

This is one of the key elements that keeps so many traders and investors from making a decent return in the market, in fact, if you can’t control your emotions none of the other stock tips here will help you. But how can you do it? You are human after all.

The best way is to have specific rules that tell you when to get in and when to get out of a stock, and follow them. This will make sure your emotions will have no control over your position. You can only get out once your rules tell you to and not before.

Founder & CEO at Unicorn Bay. Masters Degree in CAD/CAE developed several portfolio optimizing products for banks. Has a great experience in investments and math behind the Portfolio Risk Management.