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"How Much do I Invest" Author: Joseph Sgro
============================================================ We need to tighten up our act. Too much left to chance is the recipe for a dangerous result. Tightening up means we make rules as to "HOW we will play this game" and we stick to them. Money Management - Your Ticket to Profits ------------------------------------------- If your account is $10 000 then you will have a very good idea as to how much you will place on any (one) trade. A rule I've adopted for a small account is an allowance of 10% on any one trade. You will trade in parcels of $1000 and you will only suffer a maximum loss of 10% of that trade. Thus you will trade with a $1000 and you will cap your loss at $100. You will quit the trade if you lose $100. Now you need to be comfortable with your rules so I offer mine as your guide - you decide what your rule will be. In other issues I have mentioned the sort of return you need if you make a 10% loss or a 50% loss. Look at the returns needed just to get your money back: 10% loss.....................11% profit required 50% loss.....................100% profit required A wonderful resource by David Jenyns will help you fine tune your trading tactics and help you adjust the size of your trading positions. Follow the link: http://tinyurl.com/4xml6 I also suggest you start buying and selling shares(stocks) to get some experience in trading without the volatility of other instruments like - options, warrants and futures. Work on profitable stock trading and then learn how to trade other things. This gives you confidence and also gives you time to learn and experiment without too much damage. To prevent serious loss don't trade unless someone is able and willing to provide you with a "stop loss". It is hard to get the ideal broker but you do want to increase your chances of success and "stop losses" are VERY IMPORTANT part of your system. Ring the brokers and ask them whether they provide the service. Discount brokers are preferable if you have a small account otherwise the cost will eat your profit. You don't want circumstance to push you into placing MORE than your 10% into the trade. So do the numbers and don't worry about broker advice - your system is your advisor..got it? I've mentioned it before and I'll give you the link here. Mark McRae has created, "Trading For Beginners". He gives a very good explanation of trading basics. I love my copy! He is on the ball with his introduction into technical analysis. Understand, if we were rational and unemotional the stock market probably wouldn't exist. Instead we are blessed with a means to earn a superior living, without the 9-5 routine! Now you make sure you get your copy and read it..okay! Just before I give you the link make sure that when you get your copy you don't skip - "stop losses" on page 70. Here it is: http://tinyurl.com/2k29q This resource is essential for starters. I wouldn't stop with this one but I mention it because it's easy to read and understand. The next one to read is this one: "The way to Trade" http://tinyurl.com/2fgrv We are going from learning the basics to the nitty-gritty of applying what we learn. Take your time. If you know your stuff and feel comfortable with it you can make your cash very quickly - believe me. So don't neglect these resources if you really want to succeed. "The way to Trade" has been a huge hit! Remember when you study any of this material you are benefiting from many years of experience and a great volume of trades conducted by these traders. You will never be able to replace experience so that is what you are really paying for. The basics remain basics unless you learn HOW to apply the information. Knowlegde is useful, followed by a trading system you understand. Test every concept on paper first without "risk". You will need a way to get end of day prices either from the paper or some data provider and then chart by hand or use computer charting packages to draw your price charts, with technical indicators to help you analyze the price chart. Find a system - something you are comfortable using and build your skills over time. I have been doing my own swing charts and also using Metastock with technical indicators. I use a variation of the "123 System", to time my writing strategies. (You can get the "123 System" and 20 other bonuses bonus by taking up the offer - see the author bio link.) Now if you are following a stock make sure you get to know it's every move. I would suggest you only follow ONE stock. The reason is that you will start to understand it better and you will become more successful trading that stock. The same goes for any other trading instrument. You should be paper-trading before you put any money on the line. Don't choose specs for this exercise.... trade big companies...top 20, top 50, top 100. You need volume and liquidity so check the numbers and make sure your chosen stock has a BIG following and is a profitable company. Build Your Trading Skills Use The Resource List: 1*Knowledge of the basics - not just technical analysis "Trading Secrets Revealed" is a step-by-step trading roadmap that designs excellent money management. http://tinyurl.com/4xml6 "Trading For Beginners" Reducing risk via position sizing(how much do I invest) and applying stop lossess. http://www.surefire-trading.com/sft.php?offer=tutorxt007&pid=1 2* Using a trading system you feel comfortable with - testing it out thoroughly before investing money. Learn About Trading Systems http://tinyurl.com/2fgrv Get Trading Plans http://tinyurl.com/4ehhs 3*Starting off with stocks and building your skills and your knowledge and then trying out other instruments. "How to Trade the Futures Market" http://tinyurl.com/2rcxz Regards, Joseph Sgro THE 10 Simple Rules Ezine http://www.tutorhelp.com.au/ezine.html P.S. Happy reading!! http://www.tutorhelp.com.au/BLOG.html ================================================== Copyright(C) Joseph Sgro 2005 Further this discussion by reading: "10 Simple Rules to Make Serious Money in the Sharemarket and Keep it!" http://www.tutorhelp.com.au/sharemarket.html For more articles: http://www.tutorhelp.com.au/articles.html ================================================== About the AuthorJoseph Sgro started THE 10 Simple Rules Ezine is an paid subscription Money Management guides and resources Simple Ways to Money Management Simple Ways to Money Management Forget The Budget - Create A Spending Plan 80% Wins with Option Spreads Money Exchange tips, advise & checklist Equity Options Paper Trading System Discount Dental Plans |
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2010-09-04T14:54:36-04:00