Learn How to Lose and Risk Management

One of the leading traders on Chicago Mercantile Exchange, because of a single trade lost everything!

For all of his years of experience and money, he had failed to master the most important concept in trading: Risk Management!

Each trader seems to have his own unique way of identifying market opportunities. One buys a stock in the hopes of never having to sell it, while another might hold a position in the market for a day or even just a few hours. Yet both individuals might be immensely successful in the markets. How can that be?

It's because every trader who has been consistently successful in the markets has mastered the concepts of risk management.

Warren Buffet's two rules of investing are:

1. Never lose money and

2. Never forget rule number 1!

Paul Tudor Jones says that he is always thinking about losing money as opposed to making money. He does not focus on making money; he is focusing on protecting what he has!

Jim Rogers, who for years was a partner with legendary hedge fund investor George Soros, said "My basic advice is don't lose money!"

Bernard Baruch, the renowned investor from the first half of the 20th century advised "Learn how to take losses quickly and cleanly."

Yet, when most people start trading, the only thing they think about is the profit objective. Countless hours are spent on discovering how to buy and sell the market with unwavering accuracy. Once they buy a market, the amateur trader only thinks about how high is the market going to go. Little effort is put into considering how low the market could go, and where they should get out in order to control their losses.

These thoughts, which are so distant from the minds of most traders, are what separate the winners from the losers.

Risk management is the practice of determining what percentage of your account to risk for each and every trade in order to maximize the expected profit potential of your trading strategy.

Once this amount is determined, this percentage must be translated into an absolute value and stop loss orders must be placed once a trade is entered in order to control potential losses at this value.

There is no guarantee that such efforts will control your losses, since the market can gap in price beyond your stop loss order, resulting in losses greater than planned.

Ioannis - Evangelos C. Haramis was born in Greece in 1951 and he studied in Greece, USA and in Belgium. He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank and the editor of http://www.greekshares.com/

To learn how to profit with your investments read: http://www.greekshares.com/orderbook.asp

C opyright © 2005 I.E.C. Haramis

haramis@greekshares.com

---

Holy Grail Investments

Every year I go to the Money Show in Orlando,... Read More

Brain Snappers and Other Wall Street Nonsense

The last time you spoke with your broker did he... Read More

Getting Started In Investing

Are you ready to open your pathway to financial independence?Well... Read More

Beginning Investor - Investment Terms

Over the course of the past two months, readers have... Read More

Finding False Gold in Penny Stock

As far as traders go, many do not see the... Read More

Need To Trade!

You don't HAVE to be trading.As a novice trader, you'll... Read More

Copy Cat or How to Use a Successful Trading System

How many books have you read about successful traders? How... Read More

Volatile Oil

The Light Crude Continuous Contract fell from $67.70 a barrel... Read More

Mutual Fund Returns May Not Be As They Seem!

Arthur Levitt, during his tenure at the SEC, experienced many... Read More

Day Trading the SP Futures with Initial S/R and the NYSE TICK

For instance, if the market moves up in the first... Read More

How to Use Annual Report

There are many steps in calculating the fair value of... Read More

Get Wealthy With the Rule of 72

When it comes time to retire how many people would... Read More

Should You Put Your Annuity in an IRA?

Let me start by answering that question...if an annuity fits... Read More

Focus Your Investments on the Long Term

"All human power is a compound of time and patience!"... Read More

Use this Simple Trick its to Buy $100 Bills Direct from your Bank for only $97

Most People just don't understand the power of using their... Read More

Global Markets: A Window on the World Economy

Expectations drive the market. Every stock price is driven by... Read More

How to Terror-Proof Your Money

"To drift is to be in hell, to be in... Read More

Have Analysts Gotten Honest?

It caught my attention when I heard an analyst on... Read More

Trading Commodity Futures Using Support and Resistance - Paper Trading

Setting Up a Paper Trading AccountQuestion: I cannot trade with... Read More

Real Estate Clubs Hot Among Investors

Six or seven years ago, the stock market was booming,... Read More

Moving Average Convergence Divergence ( MACD ) Charts

The Moving Average Convergence Divergence charts, or MACD charts for... Read More

Asset Location ? Increase Investing Returns & Reduce Your Taxes

Location ? Once the holy grail only for real estate... Read More

Basic Options Terms

Options are good investing and speculative instruments. But options terminology... Read More

Before You Start Investing

There maybe several reasons why you to want to invest... Read More

An Investment Real Estate Strategy Unknown To Most Is A Negative Amortization Loan

If you want to make the most of your personal... Read More