Focus on what you can Control

We all like to have control over things we do or things that happen to us. We like to know what we will spend our time on. We like to know where our next meal will be coming from. And when we give away control of something, we like to make sure that it will still be safe for us. Simplest example would be when we are in a car driven by someone else. We make sure that the driver is sober, completely awake, experienced, and generally good at what he is doing. We check the condition of the car to ensure our safety. Even though the driving is not done by us, we try to minimize the risk as much as possible by controlling other variables.

In the markets the returns are not in our control. After you take a position, you can not will the market to go up or down. Exceptions being low float stocks vis-a-vis your account size. If your capital is large enough to move a large cap or some mid cap stocks you don’t have time to read this blog anyways. So what you can only truly control is risk. It only makes sense to focus your attention on managing it.

There are different ways of doing it. You can sit on the sidelines on the days when a big news is expected or earnings are scheduled. You can use market volatility index or VIX to avoid days with higher than average volatility. You can have a ban list of your own which would contain stocks under market pressure such as ‘Yes Bank’.

Find out which way of risk minimization works best for you and stick to it. Trust me, I learnt it the hard way…

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