Two Keys You Need To Trade Rightway!

[ramesh151]

2 keys to trading success

REMEMBER EVEN MILLIONNAIRES CAN LOOSE ALL THEIR MONEY IF PROPER RISK CONTROL AND MONEY MANAGEMENT IS NOT USED. YOU CANNOT USE ALL YOUR CAPITAL TO TRADE. JUST USE RISK CAPITAL,WHICH EVEN IF LOST IN TOTAL,WONT SINK YOU.
OUR AIM, A TOTALLY UNSINKABLE SHIP OF MINE OR YOURS,A TRADING SHIP!!!
BEST OF LUCK
Ramesh151
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Gents,



I always like to be upfront so before you begin, I suggest you read the disclaimer at the bottom of this page. While trading can be very rewarding, it also carries many risks, so please consider all these risks carefully.



I can't say it enough, but money management is the most important part of trading next to the emotional and psychological aspects of trading.

I personally like to use one of the two following money management strategies. In these examples I will use stocks, but you can apply the same principles to any market and the size of your account.



CONSERVATIVE:
In this strategy you would divide your trading capital into 10 equal portions.
For example: If you have $25,000 in your account you could buy $2500 worth of 10 different stocks.



In this strategy you should limit your stop losses to 10 percent or less. This means that you would never risk more than $250 on your $2500 worth of shares. By doing this you are never risking more than 1% of your capital on any given trade. This will also allow you to survive a string of losses more easily.



If you want to be more aggressive with this money management plan, you could raise your stop to 15% max.



NOTE:
Ultimately your risk will be determined by the entry point level and the initial stop placement level. So... Even if you are willing to risk 15%, but the trade setup dictated using a 7% stop loss, then you would not go over it.



MODERATELY AGGRESSIVE:
In this strategy you would divide your trading capital into 5 equal portions.
For example, if you have $25,000 in your account you could buy $5000 worth of 5 different stocks.



With this strategy you would limit your stop losses to 15% or less. This means that you could not risk more than $750 on any one position.



As we know in trading, there is always a trade off. The more conservative strategy will allow your losses to stay smaller, but your overall wins will be smaller in relation to the overall size of your account.



The more aggressive strategy will allow much more dramatic gains, but also run the risk of bigger losses.



The bottom-line is you need to apply what is best for your financial and emotional comfort levels. Please note that these money management strategies are what I like to use personally and that I also teach my clients, however.... You must ultimately make the final decision to what suits your financial situation, goals and needs.


NOTE: I even have some clients that use a ULTRA- CONSERVATIVE approach:
They divide their trading capital into 20 equal portions. For example: If you have $25,000 in your account you could buy $1250 worth of 20 different stocks. This can be a very good approach for new traders as it will help to keep the losses much smaller.



If you trade forex you can keep your risk down by buying the "mini contacts" which are one tenth the size of the regular contracts. I highly advice the mini contracts for new traders or whenever you are testing out a new system or strategy. It is much less painful to make your mistakes when the losses are much smaller.



Keep an eye out for our special upcoming trades selections for the forex, stocks and options markets.



Until next time...



Jeff Wilde

Editor: www.win-at-trading

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We thank Dr Jeff Wilde, for his most useful article.
Readers, as a courtesy,please visit his wonderful website,mentioned above.

[arjun]

very useful thinks
thank u very mutch