TheRiskBlog

In books about trading, at seminars, at lectures or in magazines – everywhere you look, you get introduced to trading systems and strategies. It seems like everybody has his own idea of how to make money in the markets. And you will discover that most contents are quite different.
One system may be technical, using a market scanner, the next might trade off the news

Very simple idea but this is the heart of risk management. Every trade we make sets out to be a winner, but if we do not win for any reason, we need to make sure, that we don´t lose much. There are several ways to achieve this goal.

1. We can improve our hit rate and only trade stocks we know go up or down. The problem is, that in most cases we do not know exactly whether the stock will go up or down and it is a good amount of guess work. So improving our hit rate

If you had a busy day and you cannot trade as long as usual, don’t begin to stress yourself. In this situation you won’t gain any advantage by trying to make your money in only half an hour. If you get nervous and don’t have much time left before you must leave your computer, your choices will reflect this.

Did you ever want to know what P/E means or what EPS tells you? If you are not working for a bank or you are new to the investment world, these are questions that need to be answered. You can find a glossary when searching the web, but most of them complicated and do not help. For your first steps you can find an easy to understand

Jessy Livermore advised his readers in “How to trade in Stocks”:

“Wishful thinking must be banished!”

You will read something similar to this in many publications about trading and risk-management. Market direction in your favor as wishful thinking or hope that markets will turn in your favor might leave you with serious problems in the near future.

This quite old book from Edwin Lefévre tells us the story of fictional Larry Livingston. He started trading as a boy in Bucket shops and went on to became a very successful Trader of the early 20th century. But Livingston is the fictionalised Jesse Livermore, quoted as the greatest trader of all times. We’ve featured Livermore’s book “How to trade in stock” before in this blog.

A trader can make many mistakes while acting in the markets. But one of the most crucial ones is Overtrading. Most beginners and sometimes even professionals fall for this trap.
Overtrading means that you trade in a situation where you shouldn’t trade much or even trade at all.

Most of the times finding the right trading opportunity can be a difficult task to do. It is even more difficult when considering the correct risk level. When you jump between different stocks, most of the times you will lose not win. The reason being is, you only jump in on an “opportunity” when it presents itself to you. Most of the times the real opportunity is gone when we jump in.

So what is the solution? There are several possibilities, i have chosen four of them that proved to be profitable in the past