Building Wealth All-in-One For Canadians For Dummies by Bryan Borzykowski

Building Wealth All-in-One For Canadians For Dummies by Bryan Borzykowski

Author:Bryan Borzykowski
Language: eng
Format: epub
Publisher: Wiley
Published: 2012-12-12T16:00:00+00:00


Chapter 4: Money Management Techniques and Trading System Tips

In This Chapter

Making successful trades (and cutting your losses)

Managing your holdings

Protecting your money

Entering and exiting trades

Getting to know the bid/ask spread, stop losses, and limit orders

Avoid trading pitfalls

Understanding trading systems

Now that you know how to pick your stocks, you’re almost ready to trade. But we want to share a few more things before you hit the buy button. In this chapter we dig deeper into the technical analysis that most traders abide by. Most of this won’t apply to the long-term investors who buy securities and hang on to them for a few years. It’s the short-term traders — people who hold securities for between one day and a few months — who will get the most from the next several pages.

In this chapter we talk about money management strategies to help you minimize the damage of losses (you can’t win them all). We also cover margin requirements, short selling, and developing a trading system. It’s a lot of information, but it’s a must read for anyone who wants to trade. Trust us, you’re almost ready!

Identifying Important Characteristics of a Successful Trader

Successful traders share a common trait. You’ll find that they all successfully manage their money. The critical points of successful money management may be difficult to implement, but they’re easy to identify. They include

Planning your trades carefully by identifying entry and exit points

Minimizing losses by ruthlessly adhering to your stop-loss points

Protecting your profits with trailing stops

Exiting your position when the trend ends

When using technical analysis to make your trades, you won’t get the lowest entry price or the highest exit price. That means you will always leave something on the table. The idea is identifying when a trend has begun, entering the position, and riding the trend until it ends.

Opening the Door to Successful Trading

Because your way to successful trading is disciplined money management, the key to opening that door to success is developing a plan for your trades and sticking to that plan, even if it goes against what your gut tells you. Sometimes you think you’ve picked what seems like the perfect stock, but then it just doesn’t perform the way you expected.

Before entering that trade, you need to set an entry point, the price at which you’ll enter a trade, and an exit point where you will exit the trade if it goes poorly. Don’t deviate from your plan, even if it means accepting the fact that you made a mistake. We discuss setting entry and exit points later in the chapter.

Although it may be cliché, it’s nevertheless true: Cut your losses short and let your profits run. In other words, fold (sell) when your losses first appear and hold as your profits continue to build.

Your most important money management goal is to get out of losing positions as quickly as possible. After taking normal up and down price fluctuations into consideration, you must develop a method of recognizing



Download



Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.