There are many misconceptions about money management. Most think it means trading with stops -- but that is only a small part of it. Below is an excerpt from a dynamic complimentary report, titled "How to Safely Double Your Profits in 2009 Trading ETFs." This little tip alone could save your trading account...
Why use risk controls? Every trader/investor must guard himself against drawdowns -- i.e., the percentage drop in his account size after one losing trade or consecutive losing trades.
For example... Imagine that, after losing a few trades in a row, your $20,000 account is reduced to $12,000: that would be a drawdown of 8,000/20,000 = 40%. If I were to ask some new traders, "In order to be back up to $20,000, what percentage return do you need to generate?" Many would answer, "Since I lost 40%, I have to make back 40%!" This couldn't be more wrong!
Note that, after losing 40%, the trader now starts with a lower base: i.e., to undo the $8,000 loss, the return he needs to generate is 8,000/12,000 = 66.6%!
The more severe the drawdown, the harder it becomes to undo the damage -- as shown in the numbers below:
DRAWDOWN % ... % REQUIRED TO GET BACK TO BREAK-EVEN
10% ... 11.1%
20% ... 25%
30% ... 42.8%
40% ... 66.6%
50% ... 100%
60% ... 150%
70% ... 233.3%
80% ... 400%
90% ... 900%
That is why all professional money managers only risk 1-2% per trade. It's because, no matter how good your trading system is at some point, it is a statistical fact that you will have 10 losers in a row. Based on risking only 1-2% per trade, this is only a 10-20% drawdown and easily recovered.
A full 99% of the hyped-up trading and investing courses in existence don't say or do this. They say risk 5-10% per trade. It is wrong, and will cause you serious financial pain if you follow their advice.
Many of them also use arbitrary stop-loss advice. For example, they say, "Place your stop at $100.10 because that is on the other side of a major support or resistance, trend line, MA, etc."
This makes your risk based on the size of the stop. That is also wrong, because the risk can be too large and it's not the same risk on each trade.
Others reverse this and say, Risk only 2% total, period, and let that determine your stop. This is also wrong, and will hurt you because it is important to have the correct technical stop.
The answer is to do both. Use a percentage and technical stop together.
It works like this: Let's say the technical stop is $100.10. But, based on your entry price, that is a 3% risk. Since your plan calls for a 2% risk, you simply lower the number of shares you are trading. This lets you stay within your 2% risk and have the correct technical stop. This is exactly what most professional money mangers do.
Some say that this will lower their profits, because of trading fewer shares. So what! Study the numbers above again.
You know the old quote, "More risk equals more reward." Well, it's not always true. Sometimes more risk equals more risk! If you lose your money, you have no chance to make a profit. Even losing 50% is disastrous, because you would then need to make 100% to get back to even.
As Warren Buffet says, There are only two rules in investing. Rule #1: Don't lose money. Rule #2: Don't forget rule #1.
I'd like to add a third rule: Correct money management and position sizing must be mastered to ensure your long-term success.
The good news is that it is easy to have correct money management and position sizing. I just explained how to use a combo of a percent [%] stop and a technical stop. If you want more of an explanation, please visit the Free Videos area on this homepage, and click on the "Why have risk controls" article/video title.
The system of entries, stops and profits-taking is only half of your key to success. The other half is money management. If you get this part wrong, you will lose your account every time -- regardless of how good your system is.
Click link below for the free newsletter on how to safely average 6% per month trading Exchange Traded Funds [ETFs]:
==> http://budurl.com/nvp2
P.S.: In order to access the powerful F>R>E>E videos, you must first opt-in for the complimentary report.
____________________
Click Here to Read Your FREE Report, "How to Safely Double Your Profits in 2009 Trading ETFs"
Showing posts with label articles. Show all posts
Showing posts with label articles. Show all posts
Saturday, August 01, 2009
Tuesday, November 18, 2008
How to Make Money Fast Online
Editor's note: Periodically, we like to bring you insights from men and women who truly prosper by example. Following, is a guest article by multimillionaire Mack Michaels [pictured], who's mentored countless folks on making money online. Simply put, he brings a wealth of experience to ProsperNOW readers.By Mack Michaels, Millionaire Mentor
Maverick Money Makers © 1997 - 2008
The question has come into everyone's mind at one point or another: "How do I make money fast?" Luckily, for everyone who has ever had that question come to mind, there is an answer!
There are several ways to make money quickly. Now, we will venture through the online category.
Here are three websites to make money online:
1. Associated Content
2. CashCrate
3. Forum Booster
Associated Content
Associated Content should be the No. 1 stop for those people who frequently ask themselves, How could I make money fast? Associated Content requires you to write content -- which, for those who aren't familiar with the online language -- means articles.
Associated Content requires that you write articles for them. They will pay you anywhere from $3 to $40 for your content. Most of the time, however, the bids that they place on your content are for much less than $10. Still, this is a great way to make money online if you can type several articles per day.
You may be surprised to see how easy it has become to earn a part-time income through writing for Associated Content.
CashCrate
The next site that we will talk about is CashCrate, a site that pays you to take surveys. They may pay anywhere from a dollar to possibly a hundred dollars, just for you to take a survey.
Doesn't sound too bad now, does it? The reason they pay you to complete surveys is that companies are willing to shell out loads of cash for in-depth information from their consumers to find out exactly what the word on the street is about their product or services.
They even have a daily survey on the homepage that is guaranteed to make you some extra income. The guaranteed survey on the homepage pays $0.80. It may not seem like much, but do the math: Over a 30-day time period, that is almost $30 extra just for taking surveys.
Forum Booster
Are you still asking yourself that question, How can I make money fast? Well, if writing tons of articles and taking surveys doesn't really sound like your cup of tea, there is always the alternative of Forum Booster.
Forum Booster is a website that pays you $0.10 for each post you make on a forum. This is great for those of us that would be searching and posting on forums anyway, so why not get paid for it? If you can post 60 posts in one hour, you can make $6, which is not that bad for earning money online.
It may not be minimum wage, but you have the advantage of being in the comfort of your own home. You can be in your pajamas sipping coffee while working on posting on these forums. Each post should be a minimum of 12 words, which is not difficult to do at all.
Overall, there are tons of ways to make money quickly online. These are just the tried-and-true, and the best of the best.
Take Action
Maverick Money Makers is a private society that will teach you how to build a six-figure-a-month business on the Internet. If you want to make money online, join the society before it's too late:
==> http://TinyURL.com/a2vleq
____________________
I've discovered how to make six figures a month online. Have you?
The question has come into everyone's mind at one point or another: "How do I make money fast?" Luckily, for everyone who has ever had that question come to mind, there is an answer!
There are several ways to make money quickly. Now, we will venture through the online category.
Here are three websites to make money online:
1. Associated Content
2. CashCrate
3. Forum Booster
Associated Content
Associated Content should be the No. 1 stop for those people who frequently ask themselves, How could I make money fast? Associated Content requires you to write content -- which, for those who aren't familiar with the online language -- means articles.
Associated Content requires that you write articles for them. They will pay you anywhere from $3 to $40 for your content. Most of the time, however, the bids that they place on your content are for much less than $10. Still, this is a great way to make money online if you can type several articles per day.
You may be surprised to see how easy it has become to earn a part-time income through writing for Associated Content.
CashCrate
The next site that we will talk about is CashCrate, a site that pays you to take surveys. They may pay anywhere from a dollar to possibly a hundred dollars, just for you to take a survey.
Doesn't sound too bad now, does it? The reason they pay you to complete surveys is that companies are willing to shell out loads of cash for in-depth information from their consumers to find out exactly what the word on the street is about their product or services.
They even have a daily survey on the homepage that is guaranteed to make you some extra income. The guaranteed survey on the homepage pays $0.80. It may not seem like much, but do the math: Over a 30-day time period, that is almost $30 extra just for taking surveys.
Forum Booster
Are you still asking yourself that question, How can I make money fast? Well, if writing tons of articles and taking surveys doesn't really sound like your cup of tea, there is always the alternative of Forum Booster.
Forum Booster is a website that pays you $0.10 for each post you make on a forum. This is great for those of us that would be searching and posting on forums anyway, so why not get paid for it? If you can post 60 posts in one hour, you can make $6, which is not that bad for earning money online.
It may not be minimum wage, but you have the advantage of being in the comfort of your own home. You can be in your pajamas sipping coffee while working on posting on these forums. Each post should be a minimum of 12 words, which is not difficult to do at all.
Overall, there are tons of ways to make money quickly online. These are just the tried-and-true, and the best of the best.
Take Action
Maverick Money Makers is a private society that will teach you how to build a six-figure-a-month business on the Internet. If you want to make money online, join the society before it's too late:
==> http://TinyURL.com/a2vleq
____________________
I've discovered how to make six figures a month online. Have you?
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