Hedgeking and Others.........

M

midlifeguy

5 Important lessons you should learn:

1) Never risk more than 10% of your portfolio in any one stock.
2) Choose an exit point if the trade does not go in your favor.
3) Fundamentally understand what you are buying. If you looked at the fundamentals on your 2 stocks, you would have seen serious overvaluation.
4) 1/2 of your portfolio should be in longer term securities such as ETFs, Fixed Income, Closed End Funds and the like. This is money you should NOT trade unless you are replacing it with a similiar longer term security.
5) Never ever go fully margined. This is a recipe for disaster.
If you do go margined, it should be closed out at the end of the day. Never hold a fully margined account overnight. Reason being is that stocks can have serious gaps down or up so your exit stops
whether mental or actual will never have a chance to work. For example..you are long @ $40 but tell yourself if stock goes to $36, I am out.....well you decide to hold on fully margined. Overnight, the CFO is busted for accounting fraud..stock plunges $20, your stop if in place is executed at $20, not the $36 you were hoping for.

There obviously is more to it all than what I just wrote but if you follow these 5 rules as a start, you will never experience what Hedgeking just did.

TIM
 
Quote from midlifeguy:

5 Important lessons you should learn:

1) Never risk more than 10% of your portfolio in any one stock.
2) Choose an exit point if the trade does not go in your favor.
3) Fundamentally understand what you are buying. If you looked at the fundamentals on your 2 stocks, you would have seen serious overvaluation.
4) 1/2 of your portfolio should be in longer term securities such as ETFs, Fixed Income, Closed End Funds and the like. This is money you should NOT trade unless you are replacing it with a similiar longer term security.
5) Never ever go fully margined. This is a recipe for disaster.
If you do go margined, it should be closed out at the end of the day. Never hold a fully margined account overnight. Reason being is that stocks can have serious gaps down or up so your exit stops
whether mental or actual will never have a chance to work. For example..you are long @ $40 but tell yourself if stock goes to $36, I am out.....well you decide to hold on fully margined. Overnight, the CFO is busted for accounting fraud..stock plunges $20, your stop if in place is executed at $20, not the $36 you were hoping for.

There obviously is more to it all than what I just wrote but if you follow these 5 rules as a start, you will never experience what Hedgeking just did.

TIM
More...

I'd thought I'd throw in my .02 worth.

Never risk more than 10%....pretty good rule.

Instead of choosing an exit point when it goes against you, I would choose an exit BEFORE you get into the trade. Write it down, and keep it handy, that way, you will be able to respond and take action during the heat of battle when the position is really squeezing.

Fundamentals are always good to know, especially if you are swing trading. Remember, markets are forward looking, so you have to anticipate to really make money.

I would never put half of my money in underperforming assets. You're best strategy is to diversify....diversify....diversify. I keep money in some cash....having an emergency fund for 12 months is absolutely essential. I trade some futures, and trade stocks. I Trade intraday scalping, short term swing trading for 1 to 5 days, and have added a weekly trend strategy, across all markets. Theoretically, I should be able to make money in every type of market. I am completely against buying any products developed by the industry. Mutual funds are a rip off, ETF's are too, never underestimate the ability of the brokers to VIG your account to death.

If you are going to leverage yourself, then it is critical that you diversify your positions, and you trade with stops. Define your risk before you get in. Only LEVERAGE yourself when you KNOW you have an edge. If you are not making money, DON"T leverage. If you are making money, then it is smart to leverage your results.

These are the guidelines I use every day in my trading, and have helped me stay on top of the game.

Good trading to all!
 
Quote from mschey:

I'd thought I'd throw in my .02 worth.

Never risk more than 10%....pretty good rule.
More...

10% on one trade?
Yeah great rule!
:confused:
 
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