TheRiskBlog

Today we start a series about risk management procedures for the active trader. We will work our way through a normal trading day and for the first step in our series we look at position size and how to come up with the correct one.

Very often traders look at a chart, find a pattern that they like and put in all they have. This is fine if the stock does what it is supposed to do but

If there is one crucial factor for an economy to grow, it is consumer spending. And with Christmas sales not far away we need to ask whether the consumer is back and wants to spend as much as he did last year or more.

Investing in the markets is hard work, at least if you want to be profitable in the long run. It does not help to be lucky on your next trade, you need to be “lucky” on your next 100 trades. In order to achieve a goal that lofty you need to make sure that you keep your losses small. Idealy you always hit the exit button just below zero.

In the real world this doesn´t happen to often, sometimes because the trader is emotional, hopes that the stock comes back or just wants to keep the stock for sentimental reasons.

If you want to improve your trading substantially, then make sure that your losses are tamed. For that i have put together the 10 most important steps to do this:

Up to now it was a tedious process that required skills and knowledge. Well, the bad news is, it still does, but the task got easier.

Mere mortals like us have no business competing with this guy, thats why we calmly sit down and listen when he talks. This is a real pro and he has been right about the markets at numerous occasions, so we listen again and adjust our risk management accordingly.

We all know what it is like when you see a chart and instantly know where the price is heading. Since you “know” that price is going up you go long. Now this was a controlled, rational decision you made, you saw the chart, you knew what was happening and you reacted, or was it?

Risk management dictates to start with small positions as long as your account is not substantially in the green. But what if you knew what other traders hold and where the money is flowing. If you had that kind of information, it ´d be easier to stock up on your position and

Did you ever think about the guys that work at NYSE. The ones sometimes jumping up and down on CNBC ?
If yes,

There are not that many things you can control when trading the stock market. But a few things you can control and they are very important to your Riskmanagement.

The most important is your account.

You are in control of selling and buying – and winning and losing.
How is that?

The Moneymanagement process is one the two main topics we deal with on this website. If you want to have success trading or investing there is just no way around the money management process. You need to do it and you need to know what you are doing. Since it is not always easy to make the right decisions involving your own money here is a primer on how to start your own money management process.