The main reason why there are a lot of players in the Stock Market that losses money is entering a trade without properly managing the risk. Newbies are the most victim of this kind of situation, especially, if they are taken by the “Hype”.
However, even seasoned traders are victims of this as well. There will come a time that you will disregard logical reason and jump to whatever is in the news. This is usually the case when everyone around is talking about it and you are out of the loop. Enter Risk Management. This will be your saving grace when things goes wrong on a trade.
Below is the Stock Share Position Size Calculator I’ve created to help you protect your capital by calculating the number of shares to buy in relation to the risk you are willing to take. If you are using other brokers, you can base your risk under the "Excluding Buying and Selling Fees" part to give you a point of reference.
COL Financial: Risk Management - Stock Shares Calculator
If you stick to your plan and exit a position when it reaches your stop loss price, you will be able to protect your capital, which in turn enable you to still invest/trade to other promising stocks. For example, if you have 100,000 and you are willing to let go just 2% (2,000) of the capital, then you have 50 chances to profit in the market.
Read the article Master the Art of Risk Management in the Stock Market to learn the details of the calculation.
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- Your Life In Perspective by Ælfræd "Elf Counsel" -
