What is the main problem in investing
When people invest in the stock market, they often face one big problem — guessing the direction of prices.
Will stocks go up or down? Because of this, investors risk losing money, as the market can behave unpredictably.
Are there solutions?
Yes, there are solutions to these problems!
To manage risks, you can use stop-losses and put options. And to avoid guessing price direction, you can apply market-neutral strategies.
How do stop-losses and put options work?
- Stop-losses: These are orders that automatically close your trade if the asset price falls to a certain level. This helps limit your losses.
- Put options: These are contracts that give you the right to sell an asset at a specified price. If the price falls, you can sell the asset at a higher price and avoid losses.
How do market-neutral strategies help avoid guessing?
Market-neutral strategies allow you to avoid guessing the direction of the market.
They help you make money regardless of whether prices rise or fall.
This is achieved by simultaneously buying and selling assets, which reduces risk.
Who uses these strategies and why?
These strategies are most commonly used by hedge funds, such as AQR Capital and Bridgewater Associates.
They know: the market is unpredictable, and risk-hedging strategies are the key to stable income.
Why doesn’t everyone use them?
Many people don’t know that such approaches exist. – Others think that it’s too complicated.
But there are simple strategies, such as pair trading, which are easy to understand and apply.
What are Market Neutral strategies?
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