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Three ways to reduce risk on the stock market

by , 17 November 2015

The stock market can be a risky place, but equally so, you have the chance to grow your wealth by putting your money to work.

You can take steps to reduce the risk you take on.

Read on to uncover three ways…


Reducing stock market risk #1: Stay away from day trading

 
Day trading is the equivalent of gambling and involves a high level of risk. You should only do this with money you have earmarked for stock market speculation. It’s not a way to invest.
 
By investing in stocks, you hope to see share prices following earnings, making you money over the long-term. You need to ensure you take steps to give your investments the best chance of success.
 

Reducing stock market risk #2: Use limit orders

 
Always use limit orders when you buy shares. This will ensure that you get in at the price you want.
 
There is a chance the share price could move higher. You can always adjust your limit order or you can wait and see if the share price comes back down.
 
If you opt to use a market order, there’s a chance that your order will go for a higher price than you thought.
 

Reducing stock market risk #3: Use closing prices

 
There can be a lot of volatility during a day on the stock market. Some share prices can swing around a lot.
 
You should only use closing prices for stop losses. Don’t use what the share price has done during the day. This avoids selling out shares that have experienced a bit of volatility, but are still worth holding onto.
 
So there you have it. Three ways to reduce risk on the stock market.
 
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In the last year, the stock market has been in turmoil. There have never been as many bargains on the JSE as there are today...
 
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Three ways to reduce risk on the stock market
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