# Article

20 Nov 2017

As the share market is highly volatile, investors rely on some variables which can help them trade successfully. These variables are flexible as they change according to the condition of the share market and adapt themselves accordingly.

Every investor must consider using the given below variables when logging their trades as these can help them to avoid losses and better analyze their mistakes to make successful share market strategies.

Return percentage: When the return amount is depicted in the form of a percentage, it constitutes the return percentage. If you sell the 100 shares at Rs 250 after buying them for Rs 200, your return percentage would be 25% {(100x50)/(100x200)}x100. It means that the trade you completed was 25% profitable for you.

Strategy: Strategy is a set of specific rules followed by an investor while making a trade in the market. Some of the strategies used by investors are CAN SLIM, Momentum Trading, Swing Trading, etc. By marking your trades with the strategies you used while making that particular trade, you can analyze your strategies and know which ones are working and which ones you should stop using in the future.

Risk amount: Risk amount is the actual amount of money you are risking on your investments in the share market. So, if you buy 100 shares of Rs 200 each and put a stop loss at Rs 180, you are risking 2000 Rs {100x (200-180)}, which is your risk amount. It is important that the risk amount is limited to the lowest amount possible to avoid losing a considerable amount of money in the share market.

Risk/Reward ratio: It is the ratio between your risk amount and the reward amount you wish to get per share. If you buy 100 shares at Rs 200 and put a stop loss at 180, your risk amount is Rs 20. And If you want to sell your shares when the price reaches Rs 250, 50 is your reward amount. So the risk and reward ratio comes to 2:5. Same as the profit and loss ratio, it means that you can be right five times and wrong only two times.

Risk percentage: When the risk amount is displayed in the form of a percentage, it refers to the risk percentage. Looking at the example from the above point, the risk percentage would be 10 % (2000/20,000). If you lose money on this investment, it will mean that the trade was a 10% loser.

Target price: It is the price which the investor wants to see his/her investment rise to. Target price is the initial goal of an investor when they decide on investing in the company. So, if you buy 100 shares for Rs 200, you can set your target price at Rs 250 per share. It means that your goal is to keep the shares with you until the share price reaches Rs 250.

Return amount: Return amount is the actual profit you make on your investments after selling them at a higher price from which you bought them. If you sell 100 shares for Rs 250 which you purchased at Rs 200, your return amount would be Rs 5000 {100x(250-200)}.

Stop loss price: The stop-loss price is the price level where stocks are automatically sold if their rate falls below a specific amount. It can be both physical (putting the stop loss price in your trade order) and mental (selling the stocks yourself if the price falls below a certain level). It allows investors to cut their losses if the market trend becomes negative and they don’t have to lose all of their money.

Mistake: Investors often make mistakes as the decisions they take prove to be wrong in the long run. But nothing goes to wasted as long as the share market is concerned. Analyzing the mistakes is one the most crucial aspects of becoming a successful trader. Mark your trades which proved terrible for you with the tag of ‘Mistake’ and learn from them so that you don’t make the same mistakes again in the future.

Notes: Making notes is not necessarily a variable but is equally essential to trading as the other variables. Write notes regarding your every trade of what went wrong and what went right. Analyze them, learn from them and use the knowledge to trade better in the future.

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• ### Patidar Samaj

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