Use Position Sizing to Limit Trading Losses
Mar0
Many seasoned traders know that position sizing or determining the size of each trade is a vital part of any trading money management plan. Many beginner traders however make the mistake of not paying adequate attention to this step. They believe that it is enough to simply define the initial stops. This however is a very incomplete way of trying to manage your risks.
Identifying trade size is vital. This is what can contribute to the protection of your trading capital. When you are sure how many units you can afford to buy, you are securing against trading float erosion. Furthermore, true position sizing puts you in the ideal spot to find out your potential to lose or win.
The truth is that size matters a lot in any investment decision. You can get a rough estimate of what you can earn if you look at how much you invest. Obviously, you will have more chances of winning big if you choose to purchase more units. This is the exact reasoning that investors follow when they go for the big fish. They know that the greater the risk, the greater the possibility of winning more. It is not appropriate though to simply base your decisions on the chance to earn a lot. Keep in mind that risking a lot also increases the likelihood of losing a lot. To determine what is ideal for you, your risk management system should include indentifying the scope of your investment.
The computations involved are not as nerve wracking as you would think. What you need to do is to take your maximum loss in currency value and divide it by your stop size. What you get is the recommended number of units that you can buy safely and securely.
To get your maximum loss figure, choose a percentage value that corresponds to how much you are willing to lose. It is highly recommended that you risk losing no more than 2% of your trading capital. This is large enough to offer you good profits but is small enough to limit your losses.
In some cases, you may need to further refine this part of your risk management strategy. Depending on your tolerance for risks, you may still view the resulting size as too huge for you. In this case, it would be wise to add another rule to keep your investment money safe. You can set a maximum percentage figure that corresponds to a specific dollar value over which you are not willing to lose. You can say for instance that you are not willing to lose more than 20% of your total float. Hence, if the result of your initial size calculations goes over this, you can follow your extra rule to further scale down your purchase of units.
Some traders can get too technical with position sizing. It’s only really right though that a lot of attention be placed on this risk management step. Put as much thought into this part as you would on identifying stops.
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One Stock Market Trade Mistake You’ll Regret
Feb0
There are lots of stock market trade and money management techniques. A lot of investors however still manage to fall into abysmal pits that aren’t easy to get out of. Many of these investors end up losing because of the same mistake. If you don’t want to end up in the same state, you have to learn to distinguish this error and steer clear of it.
The common error that many traders commit is putting too much individual value on entry indicators. They think that it’s possible to find that one indicator that will lead to a perfect entry. In their thoughts, this is what will help them get into a trade just when an upward trend is beginning. This same indicator is supposed to tell them just when to make the perfect exit too.
The brutal truth is that, there is no perfect trade entry indicator. Those who believe that there is put themselves closer to suffering losses. Deep inside, many of these traders who pour a lot of time over searching for this golden indicator know that there isn’t one. Why then do they continue making a fruitless search? It is a psychological factor that ultimately pushes them to make the mistake. Calling the shots at the beginning of a trade makes them feel that they are in control. This feeling extends well beyond the starting point.
In reality, you may sometimes be able to hit on a good entrance. It is however incorrect to believe that you will always retain control from the start to the end of a stock market trade. There is no way on earth that you will be able to predict how a trade will turn out. The market will behave independent of what you think or feel.
Of course, planning where and when to enter a trade is an important part of any trading system. It is not however, the most important element of all. Ultimately, it is not your grand entrance that will determine how much you will earn. What will secure your profits are your exit and your trading risk management rules.
If you look at the bigger picture, entry points, exit points and trade money management are the components of a trading plan. Many specialists give importance to entry and exit points but put more focus on defining risk management rules.
This term may sound a bit technical for stock market trade beginners. It is however, a lot simpler to understand than you think. The other more definitive term for it is risk management. As the term implies, this is a set of rules or guidelines that will set the risk level that you are most at ease with. With such guiding points in place, you are able to maximize your profit potential without losing more than what you are willing to let go of.
There are several points that should be covered by your management plan. Some traders tend to think that risk management is all about determining how much money one is willing to lose. A good plan however also takes into consideration such aspects as ideal trading float, initial stops and trade size.
In summary, you shouldn’t put too much effort into looking for the perfect trade entry. Although this factor is important, you should put more effort into creating a sensible risk management plan. This is the best way to make sure you will often be happy with the trades that you perform.
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Trading Interest Rate Futures Shocking Secrets
Feb0
Win a FREE COPY of the High Velocity Market Master System ($2,997) that can trade stocks, forex, futures, options, commodities and ETFs by taking a quiz and also don’t forget to get your FREE COPIES of the Ultimate Day Trading System that can trade stocks, forex and futures and the Risk and Money Management Tool. Watch these Forex Training Psychology FREE Video Series by Todd Brown that reveal the secrets of Billionaire Traders. Take your Options Trading to the next level with the Options University Live Trading Labs. Anything that anyone does in the financial markets is based on interest rates. When interest rate increase, the cost of doing business increases and when interest rates are lowered, economic growth gets energized. The relationship between the rising and falling interest rates makes the markets in interest rate futures, Eurodollars and Treasury Bills, Notes and Bonds important for everyone including consumers, speculators, hedgers, economists, bureaucrats and politicians.
Bond market is at the center of the financial universe. US Treasury Bond Market is the most liquid and the most deep market in the world where almost all the investors and governments invest long term. However, with the emergence of the bond market in China and Dubai in this decade plus the development of the European Bond Market, the importanc of the US Bond Market might diminish a little. At the center of the US Bond Marke is the FED (Federal Reserve Bank). FED has the power to raise or lower the interest rates in the economy.
Now, as a trader and as an investor, you need to understand how the bond market, the rest of the financial market, the FED and the interest rate changes work out. This understanding can help you in your trading and investing endeavors.
FED has got two policy instruments at its disposal. The first policy instrument at its disposal is the FED Fund Rate. This is the overnight lending rate that the banks charge one another for meeting their stipulated reserve requirements. FED sets the Fund Rate. The other policy instrument is the Discount Rate at which FED lends money to insolvent banks.
Now how does the FED FUND RATE trickles down through the rest of the economy. Let’s see how it works. Suppose, FED is worried about the overheating of the economy and the rise in inflation. One of the primary jobs of the FED is to control inflation in the economy. So, the FOMC decides to increase the FED FUND RATE. This increase forces the banks and the credit card companies to increase their prime rates that they charge their best customers. Now, when bond traders sense an increase in the interest rates, they start selling their bonds in the market. This increases the market interest rates further. Auto loans and the home equity plus mortgage loans are tied with these bond benchmark rates, so they increase as well. So, you can see, how a chain reaction develops in the economy. This increase trickles down through the economy with a time lag that might be as long as from six months to more than one year.
So, if you want to profit from the changes in the interest rates, you can trade FED Fund Rate Futures that get traded on CME (Chicago Mercantile Exchange). These futures contracts are a pure bet on the FED decision making at FOMC. You can also trade LIBOR Futures. LIBOR means that London Interbank Offer Rate. This is the rate that commercial banks charge each other and is widely used all over the world as a benchmark. Another popular contract is the Eurodollars and the EURYEN deposits.
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Getting Your Feet Wet – Begin Investing
Dec0
If you’re anxious to induce your investments started, you’ll get started instantly while not having a ton of knowledge about the stock market. Start by being a conservative investor with a low risk tolerance. This can give you a way to making your money grow whereas you learn more about investing.
Start with an interest bearing savings account. You’ll already have one. If you don’t, you should. A savings account will be opened at the same bank that you are doing your checking at – or at any different bank. A savings account ought to pay 2 – 4% on the money that you’ve got within the account.
It’s not a lot of cash – unless you have a million greenbacks in that account – but it’s a start, and it’s money creating money.
Next, invest in cash market funds. This can typically be done through your bank. These funds have higher interest payouts than typical savings accounts, however they work a lot of the same way. These are short term investments, so your money won’t be tied up for a long amount of time – however again, it is cash making money.
Certificates of Deposit also are sound investments with no risk. The interest rates on CD’s are typically more than those of savings accounts or Money Market Funds.
You’ll select the duration of your investment, and interest is paid frequently till the CD reaches maturity. CD’s can be purchased at your bank, and your bank will insure them against loss. When the CD reaches maturity, you receive your original investment, and the interest {that the} CD has earned.
If you’re simply starting out, one or all of these 3 varieties of investments is the simplest starting point. Again, this can permit your money to start creating money for you whereas you learn a lot of concerning investing in alternative places.
When you’re ready to get started, Chesme is a Fee Only Investment Firm that will suit your needs.
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Online Trading Education
Dec0
Online Trading Education
Rating: 5 out of 5 stars
Reviewing: INO TV’s Online Trading Education
Learning in the financial sector is a never ending process. The intricacy of the global marketplace and the intensity of competition amongst traders and investors means on-going education is not a choice but rather essential. One source of online trading education that has been rewarding for me is INO TV. If you have been in the market for some time no doubt you have seen roundtables or other educational programs you have wanted to sit in on but couldn’t because they were too pricy or only available at the wrong time. In some situations you have an interest in learning a select subject but cannot find an excellent resource. On INO TV you will discover in excess of 1000 hours of online trading education resources in their digital library. INO TV is multimedia online trading education available 24 hours a day.
Learn about Free INO Online Trading Education Videos Here
Learn about Premium INO Online Trading Education here
INO TV is organized into eleven channels distributing online trading education for traders and investors of different interests and proficiency levels. The Channels are:
Channel 1 – Beginners
Channel 2 – Charts & Analysis
Channel 3 – Currency Trading
Channel 4 – Day Trading
Channel 5 – Futures/Commodities
Channel 6 – Money Management
Channel 7 – Options Trading
Channel 8 – Market Psychology
Channel 9 – Spread Trading
Channel 10 – Stock Trading
Channel 11 – Trading Systems
Such a broad selection of choices ensures that INO TV has content of interest and value for any trader or investor. INO TV even has a search engine so you search by keyword for the subject that interests you. If you have a question or a problem their toll free support number is available to answer your inquiries. There are no disguised fees – one quarterly or annual subscription entitles you to the entire repository. If you want to try INO TV for at no cost there are spotlighted videos you can watch to give you an idea of what INO TV has to offer. I would also encourage you to visit the INO TV Premium page and search across the channels to see what’s available. This will give you an idea of the wealth and breadth of online trading education available on INO TV.
Learn about Free INO Online Trading Education Videos Here
Some of the experts I enjoy learning from are John Murphy, Martin Pring, Larry Williams, and Mark Cook but there are many others. At last count I saw 138 professionals online and new programs are frequently being added.
Bottom Line: If online trading education is significantto you INO TV is the greatest resource you will find anywhere.
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