Online Stock Trading Tips

You might have read our tutorial on Risk Management in Stock Trading:,which is a very important skill you should learn in order to become a successful trader.

Now, to move forward –> assuming you start trading a variety of diversified stocks. You are now starting to create a stock portfolio. This is both good and bad news for you as a trader.

First, the good news is that you will have a chance to increase the learning potential of your portfolio by adding diversified set of stocks.

Second, the bad news is that managing stocks portfolio is very risky and instead of achieving your learning potential, it can even result to greater losses.

Let’s solved the bad news and turned it to good news. You will be happy that a solution exists. This is called stock portfolio risk management. This technique when followed religiously can prevent massive losses in your trading capital and instead turn these losses into a long term earning potential.

Stock portfolio risk management should be part of the money management strategy of stock trading. Let’s illustrate the principle:

Let:

PortfolioTotalRisk = the total amount of risks in your stock trading portfolio.
Stockrisk1 = the %risk of your first stock.
Stockrisk2= the % risk of your second stock
Stockriskn = the %risk of your nth stock (more…)

One of the most important skills in any investor is the ability to assess and quantify risk. It is because; if you are able to measure the risk involved, it can help you decide whether it is a good or a bad investment.

The same principle applies to stocks. In stock trading, it is primarily important that in any money management strategy, risk management should be carefully considered. If you risk too much, you will end up losing your entire trading capital before it will be able to make substantial profit for you.

If you risk too less, growth of your stock trading returns will be very small and negligible. In stock trading, professionals are considering some standards when it comes to risk as well as the ways of measuring it up. It has been a widely accepted practice that “money management” and “risk management” is even more important than picking just the correct stocks to trade. (more…)