Stock Fighter

Do you consider yourself as a risk-taker? If you are in the stock market and trading stocks, among the safety measures that you can use is risk/reward calculation. You’d be surprised how easy it is to do the calculation. What you have to do is just divide the net profit by the price of your max risk and that is it!

Realizing what is Reward from Risk

Unfortunately, retail investors could lose tons of money when they opt to invest their money and there are numerous reasons associated to this. Among these reasons are brought by the investor’s incapability or lack of knowledge to manage risk. In the financial world, you’ll hear risk/reward very often. But do you really know what it exactly means?

Investing your money into market comes with certain degree of risk and you must be compensated for taking risks. If someone you trust asked you for a 50 dollar loan for instance and then offered you to pay 60 dollars within 2 weeks, it may not be worth of the risk. However, what if the same person said you’ll be paid 100 dollars within the same period? The risk of losing 50 dollars is overshadowed by the money you can make.

By figures, this is a 2:1 risk/reward. This is a ratio in which most professional and experienced investors would immediately jump over. Likewise if you are offered 150 dollars, then it makes the ratio 3: 1. Now, let us bring the same analogy to the stock market. Assuming that you’ve done your research and discovered a stock that you like. You took notice that company XYZs stock is trading currently at 25 dollars, down from its recent high of 29 dollars.

Risk and Reward in Action

You firmly believe that if you make your purchase now, XYZ will recover back to 29 dollars sooner or later and then, you can cash in. You have 500 bucks to buy stocks and thus, you bought 20 shares. When it reach its 29 dollars share once again, you can cash in and made an automatic 100 dollars profit without hassle.

Another thing to know is that, every person has tolerance risk of their own. You might be someone who loves adventure but somebody else prefers to stay at home and relax. This has to be taken into account as well. Your risk tolerance will be different from others.

Worst comes to worst, you can contact a bankruptcy lawyer by visiting this website to help you recover your financial status.

It is natural to make mistakes. It is what makes us humans. However, letting mistakes as is and not learning anything is dangerous. More about this when you are into investing or trading. While you’d see a number of businesses like rental property management Atlanta, coffee shops and restaurants and everything in between are enjoying their success, they somehow made mistakes along the way. They analyzed it and ensure not to commit the same twice.

It is very common among investors to be involved in long-term holdings. It is natural for them as well to exchange-traded funds, trade in stocks and several other securities.

In general, traders are buying and selling options and futures and holding these positions for shorter period of time and involved in more transactions than they could handle. While investors and traders are interchangeably used by some, they are actually following different trading transactions.

Yet, they are guilty of committing the same mistakes over and over.

Recommendations to Avoid Failures in Trading and Investing

Of course, there is no easy way to see success. It all boils down to hard work and discipline. Making a commitment to success is just a matter of time if you’ll be able to harness those two things and implement the said tactics below.

Preparing a Trading Plan

Seasoned traders only involve themselves in a trade only after having a well-defined plan. They do know the exit and entry points, the amount of money to be invested in a trade and maximum loss they can afford to take.

Newbie on the other hand might fail to have a plan before commencing on their first trade. Even if they do, they might be susceptible to stray from defined plan than what experienced traders would do.

Do not Chase after Performance

Countless traders or investors will opt for strategies, managers, classes and funds as per the current performance of the market. That feeling of “missing out on great returns” has resulted to making bad investment decisions.

If a certain strategy, class or fund has been performing well for the last 3 or 4 years, then we know for sure that we should have made investments to it 3 or 4 years ago. However, that cycle that resulted to its exceptional performance might be closing and the smarter thing to do is to move your money out than pour it in. After all, it is up to you what to do. In trading, there’s a popular saying that big risks come big rewards.

The only time when it becomes a sensible decision to take a loan is when you are using it for investment. In financial experts, this is a lingo known as “invest a loan”. This is when the ROI of loan is higher and risks level of investments is low. It is not recommended for investors to make investments in something that’s risky such as derivatives or stock market.

In addition to that, if ever an investor has taken out a loan, it doesn’t make sense to put money in investment that’ll mature only after the loan is due. It is necessary that the investor to guarantee that the ROI is higher than the loan cost. Well, there are instances when you can use this to your advantage too like by taking lawsuit loans for a fast pre settlement funding.

Then again, there are bonds and CDs or Certificate of Deposits that can be used as an investment option. These are alternatives that’ll mature in 90 months or maybe less and could yield more than 10 percent of loan cost. Being able to have good understanding of when and how leverage and margin comes to play can help investors to answer such question.

Trading as an Investment Option?

As a matter of fact, you can make trades with just a modest 30 dollar starting price. With this amount, you can start trading the following:

• Metals
• Stocks
• Commodities
• Stock indices and;
• Energies

The best part, you can all of this with a regulated and licensed broker.

For all those who are about to open a real account for the first time, it is imperative to understand more how to trade to avoid making regrets on your decision.

Management of Portfolio

Managing portfolio do consist of three major elements and these are:

1. Investing Time Horizon
2. Diversification of investments and;
3. Risk Tolerance

In reality, portfolio managers are developing asset management models as per the income, time to retirement, age and the likes. Then after, they are entering your variables right into their model in determining the so-called individualized portfolio.

However, you need to be mindful of the fact that portfolio management is a task not designed for the uninitiated. It is best that this is left to the pros. They are the ones who have vast knowledge and broad experience on how to deal with these sorts of things.