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|Vital Money Risk Management made easy for share traders|
|Apr 11, 2010 00:36|
|Protecting your Trading Capital|
By Joseph Barrington-Lew
More than 90% of people trading the share market lose money because the majority do not use correct Money & Risk Management principles or have the discipline to follow them.
Money Management, Position / Trade Sizing No matter what you call it, You Better Know It!
NEVER risk more than 2% of your Trading Capital on any one trade. e.g. If you have $30,000 your maximum risk is $600 but what many forget is to also cater for brokerage. If it’s say $50 RT your maximum risk is now $550 and a stop is set appropriately so if your share drops in value by $550 you EXIT first opportunity.
NEVER Trade with more than 20% of Trading Capital on any trade.
e.g. Again, if you have $30K your trade size would be $6000 but I prefer to use 19% so if I have 5 open trades and will still have 5% of my trading capital out of the market to allow for things like slippage, education, data, etc.
Professional Money and Risk Management strategies, used correctly and together, will be your foundation to trading success. Essentially, Money Management tells you how many shares to trade at any given time and Stop placement is where you must accept you have made the wrong decision, close that trade and move on. It is a defensive concept that keeps you in the game to play another day. Don’t confuse Money Management with Stop placement. Stop placement does not answer the question, how much?
Risk Management is the difference between success and failure when trading shares. It refers to Stop placement and will minimize any losses and you WILL have them but will also maximise any profits and this stop is called a Trailing, Maintenance or Profit Stop.
Money Management optimizes capital usage. Few have the ability to view their portfolios as a whole. Even fewer traders and investors make the move from a defensive or reactive view of risk, in which they measure risk to avoid losses, to an offensive or proactive posture in which risks are actively managed for a more efficient use of capital. JBL Risk Manager will help you do all of the above and very easily.
JBL Risk Manager is a simple but Professional Money Risk Management program that was specifically developed to combat the above problem BUT unfortunately the trial is currently only available to those that receive or have access to MetaStock format data.
More info: paconsulting.net.au/Share-Trading-Investing-FX/jbl-risk-manager but add www. in front of link
The 14 day FREE trial is available at the above link.
I wish you all trading success!
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