I just want to note that I've made $1,000 between yesterday and today. This is what I'm talking about when I say that anyone (in this case me) can make $500 to $1,000 a day trading. It's hard work, but anything that's worth something in life is! All I need to do is play by the 3 simple rules... D.P. & C-L-Q.
Risk Management - a technique to reduce and/or control exposure to various types of risk.
Seems pretty straight forward... however, I've never implemented it into my trading. When I trade the only thing I'm thinking of is how much money I can make and where I want to get out of a position. Not sure if this is what others do, but it works for me... at least it did until yesterday.
Someone posted on yesterday's post about my lack of risk management skills. Who ever you are, thank you for this post. Something so trivial could have saved me thousands of dollars had I used over the past couple of months.
I've been chatting with Inkfin from GOTS chat quite a bit over the past couple of days and he introduced me to a great "risk management" tool called a "trail-stop" (thanks Inkfin). I'd heard of this before, but again, something I'd never considered using... until today. And I've already been successful using it too!
I'm curious to hear what other people's take on risk management is or if they have anything to add. If so, please leave a note...
Good luck tomorrow!
Risk Management - a technique to reduce and/or control exposure to various types of risk.
Seems pretty straight forward... however, I've never implemented it into my trading. When I trade the only thing I'm thinking of is how much money I can make and where I want to get out of a position. Not sure if this is what others do, but it works for me... at least it did until yesterday.
Someone posted on yesterday's post about my lack of risk management skills. Who ever you are, thank you for this post. Something so trivial could have saved me thousands of dollars had I used over the past couple of months.
I've been chatting with Inkfin from GOTS chat quite a bit over the past couple of days and he introduced me to a great "risk management" tool called a "trail-stop" (thanks Inkfin). I'd heard of this before, but again, something I'd never considered using... until today. And I've already been successful using it too!
I'm curious to hear what other people's take on risk management is or if they have anything to add. If so, please leave a note...
Good luck tomorrow!
6 comments:
Hi nice post.I knew about the trail-stop but havent got my head around implementing it in TOS. This is a reminder for my self to read the 'help' file again.
GOTS is a great place because everybody is willing to share their ideas and views. Wish I found it months ago.
I don't think trailing stop will be that useful in the kind of day rangers we like to play. Anyway, I like using OCO order to control my risk/reward. Let me know if you want me to explain that. Probably, I will create a blog post explaining it.
Risk managment (also see my comment on yesterday's post):
With a 6,000 dollar account, I think you should limit your exposure to $3000 for each trade. Then, 5% would be $150 loss. That should be your stop loss for each trade. With this method, you'll never lose more than 2.5% of your total account via any single trade. You'll live to trade another day! Also, you can trade two stocks at once.
$10,000 - increase your amount to $4000 per trade.
$ 15000 - increase trade size to $4500
$20,000 - increase to 5,000.
This is just my non expert advice. But, even Muddy (who has a large account) never risks too much per trade. I think he uses about 5000 dollars per trade.
I've read that Muddy uses $3K - $5K per trade MAXIMUM...which means sometimes he even uses less than $3K.
I know that 13th, on the small pennies (<10 cents or so) would only risk $500 - $1000.
I'm opening another TOS account so that I have 3 active accounts again, each with a little over $3K. Thus, I use $1 - $3K per trade, and I get 9 day trades per week. My focus this month will be consistent profits rather than big profits.
On the topic of risk management, Dr. Van Tharp's approach is well regarded. It is much like anonymous's post above except it delves into the math more. Not terribly commplicated but presents it in a methodical way. Read Chapter 6 of his book, "Trade Your Way to Financial Freedom, c.1999," and you'll have what you need. I used to read TraderMike's blog back when I was first contemplating trading. He is a devotee of Van Tharp's risk/reward approach. In fact, he measures his gains in terms of "r" (Tharp's algebraic symbol for risk). Hope it helps.
Noob,
I just made a post about assessing risk/reward in regards to Van Tharp that Bluecollartrader just talked about.
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