Timing Solutions for Swing Traders: A Novel Approach to Successful Trading Using Technical Analysis and Financial Astrology

RISK MANAGEMENT

In trading stocks, there is no way that a trader can avoid taking losses on some trades. Some of the most successful traders are those who are willing to take a loss. The question is how much of a loss is a trader willing to take, and does he have the discipline to cut his losses. Having a trading strategy is a good start, but it will not mean anything if the trader has no idea of money management in trading. Money management planning is a very important part of trading and has one objective: capital preservation. There are many risk management techniques. It is up to each trader to form his own plan of how he will keep risk to a minimum while, at the same time, keeping his investment at a maximum level within the degree of risk he is willing to take.

Before a trader commits to trading, the risk factor of managing various stocks should be included in the trading plan. Trading stocks is about keeping risks to a minimum. A trader should have a realistic profit target that meets his reward to risk ratio. What is the estimated profit of the stock against its downside risk? Many professional traders do not take a trade unless the potential profit is at least three times greater than the possible loss. How much risk is appropriate varies with each trader and may be as high as 5 percent of the total portfolio value on a given day, or as low as 1 percent of the total portfolio. Some traders may prefer having different risk ratios for each stock, but will also take into ...