Hedging as a Stock Trading Strategy - Essay Example

A decrease in stock price is a risk that can be offset by getting a put choice that permits the stock to be sold at a particular price and within a certain time. When the price of the stock comes down, the value of the put alternative will raise. The option of stock analysis is resolute by the investor's faith in the different prototypes for "how the stock market works".

Thus I have based my stock trading on the basic method of buying stocks when the price is less and selling them when the price is on the rise. This helped me to keep my capital invested protected.
Also, I have made some profits on the transaction. I have made a profit on
PCLN stock is as follows:-

I bought 4,000 PCLN for a price of 82.92 each and paid 25.00 as commission totaling to an amount of 331,705.00 and then when the price of the stock increased to 87 I sold them. Thus I made a profit of 16,270. Similarly, I have made a profit on GOOG and PBR stocks.

This competition has taught me to be careful in what I do. I have learned some of the technical methods which are useful when trading in stocks and shares. The most important aspect which I came to know is the importance of the time frame for the trading to take place. Time frames also teach the alternative of how to get out of a trade. Apart from this, I knew that I will have to always keep an eye on the risk factors of trading also.

Also, I knew that a simple stock trading strategy will help to keep my sanity. The simple trading procedures helped me to carry out my trading strategy efficiently and on a timely basis. The trading competition has also taught me a new approach to managing my own emotions as a trader. I have also understood how to benefit from the crowd psychology of markets.

The three Ms of stock trading also plays a crucial part in the stock market. By three Ms it means Mind, Method, and Money. All three Ms have to be in unison and this is a simple trading strategy that I have learned from this competition. Read More