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Having A Goal In Investing
Having a goal is critical to your investing career. Goal gives
you directions. It will also set your mind to reach that goal.
So, before putting any money into stocks, the first question you
should ask is what do you want to achieve with stock...
Hot Stock Investing ... Stock Trading Strategies & Tips for investors & day traders
Profitable day traders recognize that momentum trading is among the fastest & most effective ways to harvest BIG piles of cash in the stock market. The problem is that if you don't know what stocks to look for and how to approach them while...
The Demise of Buy & Hold
Based on consistent results I think Buy & Hold should be renamed Buy, Hold & Bye-Bye. It sounded great for a while, especially for the huge majority of investors who don't have the time or interest in really doing due diligence on investments. ...
The Key to the Real Estate Investing Vault
Why do so many people struggle to get going in real estate investing? Many creative real estate investors get burned out because investing just eats up their time and energy. It drains them to be constantly making cold calls, driving neighborhoods...
The Nasty Truth About Mutual Funds Investing
Here are some facts that might make many fund investors question why they have chosen to invest in funds at all. According to John Bogle, former CEO of Vanguard Funds, one of the most trusted authorities on investing in mutual funds and a strong...
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Investing and Learning How to Lose
One of the leading traders on Chicago Mercantile Exchange, because of a single trade lost everything!
For all of his years of experience and money, he had failed to master the most important concept in trading: Risk Management!
Each trader seems to have his own unique way of identifying market opportunities. One buys a stock in the hopes of never having to sell it, while another might hold a position in the market for a day or even just a few hours. Yet both individuals might be immensely successful in the markets. How can that be?
It's because every trader who has been consistently successful in the markets has mastered the concepts of risk management.
Warren Buffet's two rules of investing are:
1. Never lose money and
2. Never forget rule number 1!
Paul Tudor Jones says that he is always thinking about losing money as opposed to making money. He does not focus on making money; he is focusing on protecting what he has!
Jim Rogers, who for years was a partner with legendary hedge fund investor George Soros, said "My basic advice is don't lose money!"
Bernard Baruch, the renowned investor from the first half of the 20th century advised "Learn how to take losses quickly and cleanly."
Yet, when most people start trading, the only thing they think about is the profit objective. Countless hours are spent on discovering how to buy
and sell the market with unwavering accuracy. Once they buy a market, the amateur trader only thinks about how high is the market going to go. Little effort is put into considering how low the market could go, and where they should get out in order to control their losses.
These thoughts, which are so distant from the minds of most traders, are what separate the winners from the losers.
Risk management is the practice of determining what percentage of your account to risk for each and every trade in order to maximize the expected profit potential of your trading strategy.
Once this amount is determined, this percentage must be translated into an absolute value and stop loss orders must be placed once a trade is entered in order to control potential losses at this value.
There is no guarantee that such efforts will control your losses, since the market can gap in price beyond your stop loss order, resulting in losses greater than planned.
About the Author
Copyright © 2005 Ioannis - Evangelos (Akis) C. Haramis
haramis@greekshares.com
http://www.greekshares.com
Ioannis - Evangelos (Akis) C. Haramis was born in Athens, Greece in 1951. He studied in Greece, in USA and in Belgium and has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank and the editor of http://www.greekshares.com
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