|
|
| Penny Stocks, High Profile Stocks, & Mutual Fund News and Information |
|
|
|
|
How To Make, And Keep, Money Trading Stocks
If you are serious about making and keeping money by trading stocks, then there are three things you need to do, and do well.
Money management Money management comes first. Without a rock-solid method of managing your trading funds, you trading results will be only be fair at best. Money management is more than just knowing how much money you have tied up in a trade. It's a method of using the right portion of your trading account on any one trade relative to the perceived risk and reward. There are a few things to consider to managing a trade successfully: Account size Your account size determines how long you stay in the trading game. If you are skillful, then you will not require a large account. On the other hand, even if you are a new trader, you can use a small account as long as you control your risk. Controlling the risk means never using more money then you need on any one trade. A very simple formula for stock market success is to risk less than 3% of your total account value on a single trade. If you have a $10,000 account, this means you never lose more than $300 per trade. If your account drops to $9,000, then you risk less than $270. As your account grows, while the total amount at risk increases, you still only risk a maximum of 3% of your account. Say your account is at $12,000, then your maximum amount at risk is $360. In theory, this ensures that you never go broke! And that is of utmost importance. Profitable If your system is profitable, then you will typically win more money then you lose. While some consider the percentage of winners relative to the number of losers, nothing could be further from the truth. It doesn't do you any good to have a system that wins on nine out of very ten trades if you give all of your gains back on the one loser. More important is that the winners overwhelm the losers. A profitable trading system might have a third of the trades result in the maximum loss planned for, a third of the trades either make or lose a little money, and a third of the trades bring in the profits. Risk It's worth repeating, risk no more than 3% of your total account value on any one trade. If you keep this in mind, you are ensured of minimizing losses to your account. At what price you enter a stock and where you place your initial stop price are used to determine how many shares you trade. Profit The profit potential of a system is the "edge". If you can estimate how much money you *might* make over time, and if that profit comes from many trades over time, then you probably have a winning system. A trading system will either have a profit target that determines when to enter AND exit (good) or it will tell you when to enter and keep you in a profitable trade as long as possible without giving back much, or any, gains (better). Orders No matter what trading pattern you use to enter a stock, you will make the most money by using the correct orders. When you wait until a stock has proven it's intensions - typically by trading above the previous day's high for a buy, or below the previous day's low for a sell short - then having an order in place that captures that exact price is crucial. Let's say your favorite trading pattern signals a buy for. If you are an end of day trader, then the next morning you watch the opening price for the stock. If the stock opens less then yesterday's high, you place a stop order to buy above the previous day's high. Even better is to include a limit price with that buy stop order. How much above the previous day's high is your call. As long as it is greater than the previous day's high, you are making the stock prove that it is going up. Sure, you give up some of the profit potential. But you are more likely to turn a profit with a stock that is moving in your favor. Once you are in a position, then you need to protect yourself from loss. If your method of picking stocks is good, then it's unlikely that the stock will revisit the current prices. Continuing with the buy example, to protect your account from a catostrophic loss, place a good-till-cancel sell stop order below the recent low. If yesterday's low is lower then the current day's low, that's where the sell stop order goes. And make certain that the order does not include a limit. Stocks can and do gap down. Expecting that you will have a sell order filled at your stop price is a quick way to the poor house. Trading system Your choice of what method to enter and exit stocks plays a critical part in your stock market sucess. A great trading system looks for low risk opportunities to enter a stock. Knowing at exactly what price signal to enter and when to exit - even if it is for a small loss - will keep your account growing. As long as you consistently follow the rules layed out by a well designed trading plan, you can count on steadily growing your trading account. My favorite trading pattern does a great job of identifying stock likely to move rapidly in your favor. There is no reason to be trading stocks that are not ready to deliver the biggest gains in the least amount of time. If you are serious about taking your stock trading to a higher level, then read about this trading pattern. Regards, Dave About The Author Dave Wooding is NOT a registered investment advisor, nor does he suggest you trade with money you can't afford to lose. Instead, he offers practical swing trading pattern information at http://www.trading-pattern.com that comes from years of trading experience.
|
|
|
|
RELATED ARTICLES
Where Is The Rabbit? We need a rabbit! Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips Day trading is all about making buy and sell decisions. When you make a trade either your going to lose money or your going to make money, and some other times you will break even. When you win some body else will lose and so forth, but that's NOT what's important. What Are You Waiting For? Do you own any mutual funds? In an IRA or 401K or wherever. Privately or at work. Top 25 Growth Funds On Monday, November 25, 2000 Investor's Business Daily listed on page B1 the Top 25 Growth Mutual Funds for the last 36 months along with their performance for the year 2000 to date. Only four showed a profit this year of 21% and the other three had increases of 12%, 5%, and 5%. Fifteen had loss of from 10% to 28% and the other 6 were down slightly. Investing in Stocks and The Game of Monopoly To begin, you might look at playing the stock market as though you were playing a game of Monopoly. That's right; for playing the stock market 'game' is not unlike playing a game of Monopoly. There are definite comparisons and parallels. Tips to Finding Other People?s Simple Trading Plans Did you know you can make money (and a lot of it) by simply modeling someone else's trading plan? Yes, it is true. Unbelievably, there are many of trading gurus doing it RIGHT NOW. Municipal Bonds Because there are so many stocks that are NOT paying dividends and also going down people are looking for a safe investment that will pay a decent return and also won't lose money. Slowly folks are beginning to think about bonds of which there are all kinds. Why Buy and Hold? Since I can remember, and that's a long time ago, the Wall Street brokerage companies, mavens and mutual fund managers have been exhorting the mantra of Buy and Hold for all your investments. There have been erudite studies published that this is the only way to go. Price to Earnings Ratio - P/E After finding the price of a particular stock, usually the next number everyone looks at is the P/E ratio. Stock Valuation using the SMP Model Disclaimer: Please note that I do not necessarily purchase, own, or partake of any of the securities or other financial instruments mentioned in this article. I also do not take any responsibility for any actions resulting from any actions taken by anyone who reads this article. You are responsible for your own finances - no one else. Do your yown due diligence when researching financial matters. VIX No, this is not a symbol for some Latin number. The Wall Street mavens talk about this market timing device as if they knew how to use it to determine which way the stock market is going ? up or down. It is pretty obvious that brokers, analysts and financial planners have not learned the language. Small-Cap Stocks: The Beginning of the Journey When an individual investor wants to roll up his sleeves and do some research in the pursuit of the next big winner in the stock market, the place many start is in the small cap sector. So, What is This Stock Market Thing Anyway? We've all heard of the stock market and probably have a general idea of what it is and how it works either from high school economics classes, television financial reports, and the countless film depictions of what happens on the floor of the New York Stock Exchange. But how does it really work and what is meant by "playing the stock market?" Big Buildings Can Mean Big Economic Disaster AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New York City, to be the world's tallest building, economist Mark Thornton offers a history-based theory of the relation between super-buildings and the economy. Thornton surveyed economic performance worldwide following the completion of each of the world's tallest skyscrapers, and suggests what these events foretell. Attitude Is [Almost] Everything I often play a little game with myself when I have to go shopping; to the post office or on other errands. Chart Reading As an investor you will want to check out any equity before you buy it. Many investors go to Morningstar that is one of the largest providers of mutual fund information in the world. It is assumed that their information is correct. After all that is what you are paying for. A Good Fund Manager Every Wall Street analyst, financial planner and broker will tell you that the right way to pick a mutual fund is find a good money manager of a fund that has a long time record. Successful Trading ? Taking Profits - Part 2 Suppose your position has made a big move and you moved your stop to your purchase price as recommended. Then let's say your stock continues to make a big move and now we're asking again the questions we asked back in the first paragraph. The first profit taking technique you can use is a trailing stop. If you moved your stop to your purchase price, then you've already used a trailing stop. Now you can continue to move your stop up as the price rises until the market "stops" you out of the position. So in essence, what you're doing is letting the market decide when to take profits. Quality Investment Information: Standing Firm In the Face of Opposition THERE'S SOMETHING TO BE SAID FOR standing firm in the face of opposition. Interestingly, most of the best stock decisions have come at times when the mainstream is saying precisely the opposite. Predictions like these can be valuable if one is to build an investment strategy around their view of the world. Buy Low - Sell High Now where have I heard that before? I know. It was my broker.
|
| Another MoreMoneyStreams.com site | home | Disclaimer | site map |
| © PennyStockNews.com 2007 |