You hear the term Risk Management being thrown around a lot lately. This is a complex and yet simple subject at the same time. From a trading perspective, we must all realize that when you are investing in anything, especially stocks and options, there is a degree of risk and uncertainty.
Without that risk we all would be buying guaranteed government bonds. How much fun would that be? So, the riskier the stocks the higher potential rate of return.
Along with that potential upside you have that underlying and corresponding prospective of downside. It is therefore incumbent upon the trader to constantly monitor their level of risk involved in both an individual stock and in their overall investment portfolio.
If you are looking for monster life changing investment returns in short periods of return, you better buckle up - you're in for a very humbling, wild and bumpy ride.
Risk management for any average stock trader should involve the following foundation:
1· GOALS - What are your goals? If you are swinging for the fences so be it. You will be buying volatile stocks that can move for or against you very quickly. If you are looking for steady better than market returns than you will need to be focusing on stocks that are larger, safer and more heavily traded and will probably move slower than the “home run” stocks. Usually, the added volatility in these stocks during uneasy times comes from the market sector they are in and not just from the individual stocks themselves.
2· RISK - What are your risk tolerance levels? You must be honest with yourself and figure out how much white knuckle, nail biting stress you can stand. If you are naturally risk averse, you should not try to be a hero and play the market like it is Vegas.
3. ALLOCATION - What is your portfolio size? A trader must be cognizant of the size of the portfolio compared to the size of each position they take. This is the proverbial “don’t put all your eggs in one basket” scenario.
Every stock trader must know his overall Risk Management and he or she better be diligent at it! You should at the very minimum be practicing the following trade parameters:
· Always set target price goals and stop losses
· Always use actual stop loss orders
· Keep each position no more that 10% to 15% of your portfolio
· In general it is better to trade stocks that have strong volume
· Avoid sectors that seem to be just fads and short term plays
· Be careful around known news events like the release of earnings
· Look for undervalued situations that have been unfairly treated by the market. These have small downsides and large upside potential
(This blog is just a primer on the subject of Risk Management. We will continue to expand upon the subject in future blogs.)
Remember, it is important to understand the importance that Risk management is and that its the heart of the Bulls to Bears trading program. Our approach is intended to reduce your exposure to any unnecessary risks. Our investment team focuses on traditional investments, and we do not risk heavy losses by trying to chase very high returns. Bulls To Bears was designed to help you make informed investment decisions, weighing potential returns against the realistic potential for loss.
With the choice of the Bulls to Bears trading program, you can choose the amount of risk you feel comfortable with for a given return. Your Bulls To Bears representative will help you pick which stocks are best for your portfolio, based on your individual circumstances and suitability.
Effective risk management can be very beneficial to investors, and more particularly helpful to those nearing retirement age. This blog has been written with individual, private investors in mind. It aims to provide you with some information about investment risks in general, as well as to provide insight how these risks are managed within our program.
We provide investment ideas and trading solutions to our clients across the globe. Our breadth of investment capabilities are extensive and among the most innovative within the market. Diversification is another way of managing the risk associated with trading. It involves spreading your money across different asset classes and investments, so as to potentially limit the impact of negative events that impact any one asset class or investment.
Effective risk management can be very beneficial to investors, and more particularly helpful to those nearing retirement age. This blog has been written with individual, private investors in mind. It aims to provide you with some information about investment risks in general, as well as to provide insight how these risks are managed within our program.
We provide investment ideas and trading solutions to our clients across the globe. Our breadth of investment capabilities are extensive and among the most innovative within the market. Diversification is another way of managing the risk associated with trading. It involves spreading your money across different asset classes and investments, so as to potentially limit the impact of negative events that impact any one asset class or investment.
Diversifying across asset classes may protect you against underperformance in any one asset class. Your asset allocation will reflect how cautious or aggressive your investment strategy needs to be.
Bulls To Bears trading signals and buy and sell alerts are sent direct to our members; via email fax or phone. Experience for yourself how we can help you to narrow your focus onto what we believe to be better trade setups. These positions are hand selected to give you not only a better probability of success but often better percentage gains.
BullsToBears.com has what you need. Take advantage of our FREE 14 DAY TRIAL today. Stop spending so much time trying to figure out what stocks to trade. We’ve got that covered.
BullsToBears.com has what you need. Take advantage of our FREE 14 DAY TRIAL today. Stop spending so much time trying to figure out what stocks to trade. We’ve got that covered.
Also, get Free access to our FREE TRADING NEWSLETTER and discover further tip's on how you can reduce your downside risk, know when to add to better positions (based on information that we provide for you) and start locking in more profits.
So, try us now for Free! We look forward to seeing you soon!
So, try us now for Free! We look forward to seeing you soon!
That's all for now. Till next time... Happy Trading!
