According to Forbes, more than one in two Americans are struggling with finances. One in three Traders will likely suffer a catastrophic loss at some point during their career. However, there are three simple risk measures you can employ right now – to not only prevent the catastrophic loss – but to place you in the Top 10% of Traders and Investors IMMEDIATELY!
#1 Don’t go TOO big
Resist the urge to go in with over 25% of your account balance even if it feels like a ‘sure thing’ (unless of course you’re a professional and you know what you’re doing). No matter how confident you may feel, the sure thing is rarely that in Trading and Investing.
#2 Stick with a proven Management Plan
If you’re a seasoned trader, you may have heard of the ‘Golden Rule’ of Trading. It’s the idea of keeping your Reward to Risk ratio at 2 to 1. This means, if you’re aiming for a 30% targets, you should only be willing to cut losses around the 15% mark. All too often, traders buy a stock without even considering an exit strategy. This is Ludacris! You must have a pre-determined plan. The stock market is no place for ‘Let’s wait and see how it goes’ strategy. Know the point at which you will cut your losses early before they spiral out of control. Don’t ever for a second think ‘It can’t possible go any lower!’ It can.
#3 is to Qualify Positions with set Criteria
Sticking with a set of rules can save you money. Ideally you want to qualify Trades with common similarities recognized by all Traders and Investors as ‘good signs’. I.e. Big upside breakout on large volume.
Here’s our ten-point checklist we use to qualify trades:
- Up 30% since last week ( & in an uptrend on the weekly, daily and 15 min. charts )
- Volume over 1 Million
- Relatively high volume
- Momentum
- Vetted – No RSS’s Etc.
- Catalyst for price move
- Good company fundamentals
- Good reputation
- Sanity check of previous news
- Common Sense check