Successful Trading ? Establish Your Risk Level

Before you embark upon a journey of trading stocks or futures, and before you make any trades, you MUST determine and establish your risk level. Traders that fail to do this are usually doomed from the start. The fact is that most trading accounts that go bust are because of the failure to determine at what point the trader will cut their losses and move on to the next trade. Rookie traders are particularly prone to do this. They hang on to losing positions hoping that they will turn around ? only to watch the price drop even further. Too much thought and effort are expended on the buying decision instead of the selling decision. The sad truth is that it's the selling decision that will determine your fate as a successful trader. And successful trading is dependent on how long and how well you can protect your account against loss until the big profit comes your way. Setting a risk level for your account and for your trades will provide such protection.

If you're like everyone else, you've got an online trading account and you're free to move in and out of positions without the input or interruption of a broker. If you're not doing this, we recommend that you do. So when you buy a position, have you determined where you would to sell it if the price would fall? Many traders only think about the price going up ? they never think about what they'll do if it goes down. You MUST determine this limit BEFORE placing a trade.

We recommend that get out of the position if it drops anywhere from 7% to 10% from where you purchased the stock, option or commodity (or any other market derivative). Yes, it could rebound and take off 100 points after you sale, but it could also drop 100 points and your account would be wiped out. Consider this, if your account drops 50%, then you need a 100% gain to get it back where you were! This is why you MUST place a stop-loss after every trade you place with your broker. Do this without fail IMMEDIATELY after placing a trade with your online broker. Once you've placed a stop-loss level with your online broker, the system will automatically sell your position when that level is reached. Remember, stay in the game until you hit that big trade!

Chuck Cox is a Technical Writer and Industrial Scientist by professional with a background in statistics. He has used mathematical and statistical methods to invest and trade in the stock, futures, and options markets. Chuck has owned various businesses and presently operates several websites. To learn more about trading in the markets, visit his website, http://www.earncashathometoday.com/trad ing-stocks.htm

---

No Load Mutual Funds: Investment Hype vs. Investment Help

With the internet such a huge part of our daily... Read More

Peer Groups

Whenever I see mutual fund comparisons in the trade publications... Read More

Your Job

There are so many kinds of work that needs to... Read More

Buying Mutual Funds

It looks like the market is ready to start up... Read More

Dont Buy Stocks based on P/E Ratio alone

I use the P/E ratio as a secondary indicator for... Read More

Mutual Fund Commissions

You have heard about a particular mutual fund from a... Read More

Laws and Efficiencies and Theories of Diminishing Returns

The basis of diminishing return discussions surround such simple notions;... Read More

It Cant Be Done

Wouldn't it be nice if you were only in the... Read More

Boiler Room 7/17/00

On Friday or Saturday evening my wife gets a movie... Read More

Mousetrap

The spring-loaded rat catcher is the ultimate low-tech device invented... Read More

An Old Proverb for Investing

"If you don't know where you are going, any road... Read More

Enronization

Even if you don't own any of their stock or... Read More

Stocks: Understand What You Buy!

"There is nothing more frightful than ignorance in action!" Johann... Read More

Making Outsized Returns in the Stock Market - Using the Dow Theory

The Dow TheoryCharles H. Dow... Read More

Buying Stocks and the Importance of Correct Timing

An investor can find and research the best stock on... Read More

Shorting Stocks ? The Basics, Part I of II

What does it mean to short a stock?This means that... Read More

Prosperity

It has fallen upon the consumer to make our economy... Read More

Analyst Reports

When you become interested in a stock or mutual fund... Read More

Trading Tips No 6: The High Cost of Low Cost Stock Market Information

It has been said that low cost or even free... Read More

Using Sector Funds to Construct Diversified Mutual Fund Portfolios

'Sector funds are too risky.' 'I doubled my money with... Read More

Dont Spend Another Dollar on Business Opportunities Until You Read This

With an insecure job market, overworked employees, insufficient retirement savings... Read More

The Problem With Hedge Funds

Are hedge funds a suitable investment for you? Hedge funds... Read More

Understanding a Stocks PEG Ratio

A PEG ratio cannot be used alone but is a... Read More

Price Targets

Every day in any financial publication you will find the... Read More

Good Stock Market Tip; Good Return!

Forget making a profit; instead focus on the income provided... Read More

Stock Trading Secrets?

How often have you come across an advertisement or e-mail... Read More

Shorting Stocks ? The Basics, Part II of II

After the publication of the first part of this two... Read More

Market Timing

Every broker and financial planner will tell you that you... Read More

Never Lose Money

Never lose money in the stock market again. Yeah, I... Read More

Dispelling Illusions of the Stock Market

How can you dispel an illusion unless you look directly... Read More

How To Pick A Mutual Fund

Mutual funds by definition are a mixed bag of stocks,... Read More

How To Be A Winner

Everyone who invests in the stock market wants to be... Read More

The Shadow

The Shadow knows. There used to be a radio program... Read More