A Beginner's Guide to the Stock Market: Everything You Need to Start Making Money Today by Matthew R. Kratter

Author:Matthew R. Kratter [Kratter, Matthew R.]
Language: eng
Format: azw3
Publisher: Trader University
Published: 2019-05-19T16:00:00+00:00

Just be sure to never add to a losing position. Pick a stop loss level when you enter the trade and stick to it. Only losers average losers. Rocket stocks go up fast, but they can also go down fast.

I usually like to risk no more than 1% of my trading account on each stock trade. Let’s say that I am trading a $100,000 account. In that situation, I will risk only 1% of my account, or $1,000. If I enter the stock at 100 and the 50-day moving average is at 95, that means that my risk is 5 points on the stock (100-95). In that case, I should only buy 200 shares of stock. If I buy 200 shares of stock, and the stock falls 5 points, I will have lost $1,000 or just 1% of my total account size.

The key to making a lot of money is not losing a lot of money in the process. If my trading account goes down 50%, I will need to make 100% in my trading account just to get back to even. When you are first getting started trading, be sure not to dig yourself a hole like this. Keep your losses small and manageable, especially while you are still in the learning phase. It’s OK to buy just 1 share of stock when you are testing out a new strategy (especially if you are using Robinhood and thus not paying any commissions).

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