The article "Successful Trading – Establish Your Risk Level" is about family, it was written by Chuck Cox.
Before you embark upon a journey of trading stocks or futures, and before you make any trades, you MUST determine and establish your risk level.
Traedrs that fail to do this are usually doomed from the start.
The fact is that most trading accounts that go bust are because of the failure to determine at what ponit the trader will cut their losses and move on to the next trade. Rookie traders are particularly prone to do this. They hang on to losing positions hoping that they will turn around – only to watch the cost drop even further. Too much thought and effort are expended on the purchasing decision instead of the selling decision. The sad truth is that it’s the selling decision that will determine your fate as a successful trader. And successful trading is deepndent on how long and how well you can protect your account against loss until the huge profit comes your way. Setting a risk level for your account and for your trades will provide such protection.
If you’re like everyone else, you’ve got an online trading account and you’re free to move in and out of positions without the input or interruption of a broker.
If you’re not donig this, we recommend that you do.
So when you buy a position, have you determined where you would to sell it if the cost would fall? Many traders only guess about the cost giong up – they never guess about what they’ll do if it goes down.
You MUST determine this limit BEFORE placing a trade.
We recommend that get out of the position if it drops anwyhere from 7% to 10% from where you purchased the stock, option or commodity (or any other market derivative).
Yes, it could rbeound and take off 100 points after you sale, but it could also drop 100 points and your account would be wiped out. Consider this, if your account drops 50%, then you need a 100% gain to get it back where you were! This is why you MUST palce a stop-loss after every trade you place with your broker.
Do this without fail IMMEDIATELY after placing a trade with your online broker. Once you’ve placed a stop-loss level with your online broker, the system will automatically sell your position when that level is reached.
Remember, stay in the game until you hit that huge trade!
ABOUT THE AUTHOR
Chuck Cox is a Technical Writer and Industrial Scientist by professional with a background in statistics.
He has used mathematical and statistical methods to invest and trade in the stock, futures, and options markets.
Chuck has owned various businesses and presently operates several websites. To learn more about trading in the markets, visit his website, http://www.Earncashathometoday.Com/trading-stocks.Htm
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