Most beginners lose their money in trading because they take unnecessary risks. Also, they focus only on profits and not on risk management. Due to this, even a few bad trades cause a loss of a large amount of money. You must understand that low risk doesn’t mean no risk. The market is full of uncertainty. But following a structured strategy and discipline in risk management, you can reduce unnecessary losses. In this article, we will explore the top 3 low-risk trading strategies that are easy to understand and beginner-friendly.
What Does “Low-Risk” Mean in Trading?
Low-risk trading means controlling potential losses on every trade by adding stop-loss and other hedging strategies. Low-risk trading primarily focuses on capital preservation, and even if a loss occurs, it should be minimal. Traders always quote the golden rule of trading: ‘Protect your capital first, profits will follow.’ To do low-risk trading, beginners should always remember the key elements of it:
- Proper position sizing
- Clear stop-loss placement
- Favourable risk-reward ratio
- Trading with the trend
This principle is spotlighted in structured trading strategy courses, where risk control is treated as more important than aggressive profit targets.
Low-Risk Trading Strategies
In low-risk strategies, your goal is not large profits but executing successful trades. To do this, you can apply the following strategies.
Trend Following Strategy
This strategy is one of the safest and beginner friendly strategies. Market moves in trends like uptrend, downtrend, or sideways. In this strategy traders don’t need to predict reversals, but they look for the ongoing trend and trade in the direction of the trend. You can use simple ways to identify the trend, like using 50 EMA and 200 EMA, or if you observe higher highs and higher lows on the chart, it represents an uptrend, and lower highs and lower lows represents downtrend.
To trade with the above strategy, if you observe an uptrend, look for buying opportunities on pullbacks, and for a downtrend, look for selling opportunities when the stock goes up. As you trade with market momentum, you stop fighting with the market and go along with the flow. This reduces the guesswork and emotional trading.
Breakout with Confirmation
A breakout occurs when the price crosses support or resistance levels. But many times breakout fails, due to which a confirmation is required before entering the trade. To enter the trade, if you observe a breakout, wait for a strong candle to close above resistance or below the support with increased volume. Increased volume is a strong signal of a clear breakout. Place the stop loss below the breakout levels for buy trades and above the breakdown level for selling trades.
Swing Trading Strong Stocks
If you don’t want the high-frequency intraday stress, swing trading in lower-risk stocks can be a better option. In this strategy, you need to filter fundamentally strong companies that are clearly in an uptrend. Then identify the pullbacks to support levels and enter near the support level. It is advised to keep the smaller position size.
Risk Management Rules for Beginners
Proper risk management is very important in trading. If you follow the basic rules of risk management, you can significantly reduce trading risk:
- Always use a stop-loss
- Avoid overtrading
- Trade liquid stocks or instruments
- Start with small position sizes
Conclusion
Beginners should start with trend following, breakout, and swing trading strategies in order to make successful trades. Beginners must focus on capital protection and consistently successful trades, instead of quick and large profits. You must manage risk carefully, control emotions, and prioritise discipline over excitement. To learn more, enrol in Upsurge.club’s stock market course for beginners. Building a strong foundation in risk management will always improve your long-term results.
Show Comments (0)