What are different risk which are faced by traders while trading in shares?

Risk is an inherent part of investing and it can not eliminated or ignored completely. Generally it is believed traders need to take high risk in order to earn high returns.Those who are not willing to take more risk have relatively small chance of earning high returns. Traders should never get involved in to risk which is beyond their capacity. To be on the safer side experts mcx tips and more can be referred while trading. Not every investment decision gives expected results, diversification helps in managing risk in a better way.

There are some risks which traders should be aware of while trading in certain asset classes. Following are some risk which are faced by stock market traders :

1. Volatility risk

Stock market is of highly volatile nature and shares prices can be extremely volatile at times. Traders and investors should be aware of the fact that share prices may fluctuate even in short periods. Keeping a good track record of market updates helps to sustain in market on long term basis.

2. Capital loss

When a company does not perform well its shares prices are most likely to fall below the price which you have paid or even zero sometimes.Traders who are trading in shares of such companies may face huge loss because of under-performance of its shares.

3. Timing risk

Timing at which you buy or sell a particular stock matters a lot because not all sectors of market will follow the similar price cycles. Therefore it is important to understand how different companies perform in different phases of business cycle. A good understanding of such cycle helps to minimize the impact of timing risk.

4. Market risk

Market keeps on fluctuating and sometimes it is really difficult to predict the market in the right direction. And these frequent market fluctuations shows its impacts on prices of different stocks. Market is risk is often influenced by external factors like changes in interest rate, economic conditions, government rules and regulations.

5. Risk with particular stock

Traders face this risk when a price of particular stock declines because of some negative news. This downfall is followed by weak trading statements. It is always recommended to study about company's performance first before making a decision of trading in its stocks.

These are just few types of risk which traders of stock market face. Individual stocks have their own risk associated with them as well. There are various ways using which risk can be managed in better way like: use of financial advisory services, stop loss orders, portfolio diversification.Traders should always carefully identify their risk bearing capability and trade according to it. By following a right trading path and disciplined trading practices traders can earn good returns for themselves.

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