Risk/Rewards

Swing trading requires a serious commitment to skill, knowledge, and emotional control. Treat it as a business at all times. Prepare a personal trading plan, carefully evaluate risk capital, and set attainable goals for the future. If personal bias expects this discipline to earn quick wealth, find another hobby immediately or just take up gambling. The markets have no intention of offering
money to those who do not earn it. And always remember this valuable wisdom: attention to profit is a sign of trading immaturity, while attention to loss is a sign of trading experience. Show a willingness to forgo marginal positions and wait for good opportunities to appear.

Prepare to experience long periods of boredom between frantic surges of concentration. Expect to stand aside, wait, and watch when the markets offer nothing to do. Accept this unwelcome state as all successful participants do. The need for excitement makes a very dangerous trading partner.

Careful stock selection controls risk better than any stop loss system. Bad timing does more damage than sustaining large losses. Make wise choices before position entry and face less risk at the exit.

Watch out for secondary gains that have nothing to do with profit. Trade execution will release adrenaline regardless of whether the position makes or loses money. Always face your true reasons for swing trading the markets. The primary motivation must be to aggressively take money out of someone else’s pocket. Rest assured, the skilled competition will do their best to take yours at every opportunity.

Every setup has a price that violates the pattern. The measurement from this breach to the trade entry marks the risk for the position. When planning execution, look for levels where price must move only a short distance to show that the trade was a mistake. Then expand this measurement to find the reasonable profit target and apply this methodology to every new opportunity. Limit execution to positions where risk remains below an acceptable level and use profit targets to enter markets that have the highest reward:risk ratios.

Each swing trader carries a different risk tolerance. Some find comfort flipping NYSE behemoths, while others play low float screamers. Follow natural tendencies and remember that swing strategies use discretionary entry. The trader alone must decide when to enter, exit, or stand aside.

Test overall results by looking at profit and loss at the end of each week, month, and year. Good results make money, while bad results lose it.

Dont Take Too Much Risk

One of the most devastating mistakes any trader can make is risking too much of their capital on a single trade. One thing is certain in trading and that is if you lose all your capital you are out of the game. Why risk so much you could be prevented from continuing? There is a saying in
poker than going all-in (risking all your chips) works every time but once. This is true of trading.

If you risk all your account on every trade it only takes one loser to wipe you out (and no trading method is 100% accurate), so you will be out of the game at some point it is only a question of time.

In general, we only risk 1-3% of the available capital allocated to a system on any individual trade. This is calculated using the size and, the difference between our entry price and our maximum stop price, and the amount of capital allocated to the system. With the win probability
and ratio of size of winning trades to losing trades we are almost certain never to lose all of our trading capital. In fact, the chance of us hitting our maximum drawdown for the year is tiny.

All trades should be of a size that almost seems insignificant. If you are worried about the size of a trade then it is too big and you should reduce the size immediately. Remember that longevity is the key to making money by trading slowly over a long time with minimal risk, is always preferable to rapidly with too much risk.

Risk and Stock Trading Fees: The Two Barriers To Overcome If You Want A Successful Trading Career.

You know the old joke:

"How do you make a million in the stock market? Start with two million?"

There is no way around it, risk and stock market fees are a part of trading that you can`t avoid. But, you can manage your risk. You can also manage the brokerage stock trading fees that eat away at your trading float. All it takes is some planning and making good choices.

If you think you`re ready to start trading, look carefully at where you`re getting your money from. Maybe you`ve been considering trading for a while and built up some savings. That`s good planning. Or maybe you`re considering borrowing money. This is generally a bad idea. Maxing out your credit cards is a quick and easy way to get cash, but the effects can be devastating.

It`s hard enough to worry about making trading profits along with the stock market fees you have to pay. But, worrying about the debt servicing on your credit cards builds too much stress. You will be too concerned with making payments to be concerned about good trading. Don Miller talks about this in Trading Markets World Meet the Traders when he tells new traders to worry about trading well, not making money. One of the best ways to learn trading is to begin on a part-time basis. This allows you to hone your skills while you still have an income stream. As a trader, you need to realize the risk you`re taking by simply putting your money into the market.

With good money management, you`ll be able to limit your risk. But, there is a kind of risk that can`t be minimized, and that`s "market risk”. This is the risk that the market might not be there tomorrow. Just by putting money in the market you are putting it at risk, so make sure you only trade with money you are willing to lose. This isn`t to say that you are going to lose all your capital - it`s just to say that you need to be able to focus on trading well, not trading to make money. See, you can only do this if you work with money you can afford to lose.

Once you`ve got your capital together, you can consider the next barrier to trading, stock trading fees. Although there is no perfect amount of capital to start trading with it`s no secret that the bigger the trading float you begin with, the easier it is to trade and the less percentage of stock trading fees you will have to pay. This is because of the single biggest expense in trading - brokerage stock trading fees.

Every broker has many different stock trading fees, but many charge flat stock trading fees per trade. These flat stock trading fees are easier on traders with larger fund sizes. For example, to obtain a better understanding on how stock trading fees work, let`s consider two traders. One is starting with an opening position of $1,000 and the second is starting with an opening position of $10,000. All traders are charged flat stock market fees of $100. So, our first trader, with a position of $1,000 has to make back ten percent of his float on each trade before he breaks even. But, our second trader only has to realize a one percent gain to reach his break-even point. This doesn`t mean that you can`t start trading with a smaller float, but if you do you are at a bit of a disadvantage.

However, you can use your trading float size to help determine your trading system. If you have a very small trading float, it`s recommended that you look at a long-term system. With a long-term system, you will be incurring far fewer stock trading fees. A short-term system, where you are receiving lots of buy and sell signals will chew up your trading float very quickly with the cost of the different stock trading fees.

This is why short-term systems, such as day-trading, are best suited to larger trading sizes - it is easier on the stock trading fees. I actually recommend that when you begin trading that you look at a longer-term system. You can manage a long-term system while still working full-time. Once you are successful with the long-term time frame, you might look at moving to a shorter-term system and focussing more time on your trading.

You can mange both risk and stock trading fees with planning, and by making good choices. Your level of capital will be set by what you can afford, and what you are comfortable risking. How that capital grows will be set by the time-frame of the systems your planning to trade, and the instruments you trade with. from winter's barrenness, they desert us too quickly!

By David Jenyns