TheRiskBlog

For today the most risk will be in overtrading. Trading too many positions without really getting into the green.
The markets look calm with a slight tendency to go up.
In a scenario like this most damage is being done by jumping in and out of positions.
The lowest risk level is achieved by going long and staying with those positions.
Another solution is to build up on long positions already held in the account.

“The relation between the stock exchange and the economy is like a man walking his dog. The man walks slowly, the dog runs back and forth.”(Andre Kostolany)

This quotation from Andre Kostolany shows how markets work most of the time. For example, sometimes markets react to economic news in a way nobody would have thought off and sometimes it just seems to ignore the economic “reality” outside the market.

You can see this best by watching the movement of single stocks…

That’s what a friend of mine recently responded when I asked him about how much of his money he wanted to risk in his stocks.

Not long ago, this friend of mine had read an article about a company which was considered to be a good stock by an economic journalist. And having available some money in his account, my friend thought about buying some stock in this company and holding it in the long term. But before he did this, he came to me asking if this was a good investment. He thought, that with me being a trader, I could help him to make this decision. He expected to hear from me, whether this company and its products were successful. But that’s usually nothing I am really concerned about in everyday trading….

At the moment it is very difficult to stay with the markets at all times. We are seeing high volatility throughout the markets. This is very helpful if you can deal with it correctly, but it doesn´t help when you are beginning and don´t quite know how to cope with risk.

On the other hand there is always opportunity out there. We as traders need to be able to find it and we can, it is not all that difficult. To be able to spot a good trade we first need to make sure that we understand what´s going on in the markets. Are the market participients scared or are they euphoric? Is there optimism in the market or does everybody think the world will stop turning tomorrow?…