Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Four Biggest Mistakes Traders Make - Failure to Control Risk

InvestorEducation / Learn to Trade Dec 31, 2013 - 11:52 AM GMT

By: Chris_Vermeulen

InvestorEducation

This is part three of a five part series of the four biggest mistakes traders and investors make which costs them time, money and usually self-confidence when trading stocks, ETF’s or futures trading strategies.


The Four Biggest Mistakes

1. Lack Of A Trading Plan – Part I

2. Using To Much Leverage – Part II

3. Failure to Control Risk

4. Lack Of Self-Discipline

Mistake #3 – Failing to Control Risk

If you were to engage in something risky like skydiving, you or a team would check your parachute to be sure its packed properly, strapped on to your body correctly before you jumped out of the plane. If for some reason you were not told how to use the gear, like when to pull the ripcord etc… I guarantee you would ask them before you threw your body out of the plane.  There is a real fear of dying so you naturally make sure you are in control of what you are about to do so your risk is managed and live another day.

But when it comes to trading this is not the case and you and I both know a good part of why. We all know people who have said rude things, quit jobs or broken up with a girlfriend or boy friend over the internet (email/text message). Let’s face it, it’s easy to be brave online and do things we would never really do in person. Heck, some of the emails I get from readers of my free weekly articles I post are so rude and some are threatening that all I can do is laugh. Because I know these people would likely never say the things they did to someone they have never met, and do it to their face all because they think my FREE short term market prediction does not fit their bias. I think you get the point here…

So when it comes to trading individuals get this what I call “Online Courage” and this is why so many fail to protect their capital when trading. They simply don’t see their money so it does not feel at risk (out of sight is out of mind). This lack of fear is what leads to loss of risk control.

I talk a lot about controlling risk in my new book “Technical Trading Mastery – 7 Steps To Win With Logic” Special Offer & Free Lifetime Subscription Expires Jan 1st!

How to Avoid Mistake #3

There area few things that can and should be done to control your overall risk when trading. The first one is diversification. Not having all your trading capital in one investment allows you to spread your risk between other investments with low correlation, meaning if one of your positions move down, another one should be moving up in your favor.

The second is diversification between time-frames. Having multiple positions based on different time frames can provide an overall lower volatility in your portfolio. For example you could be long the daily chart for a swing trade that should last a couple weeks, and you may be short the 60 minute chart because you expect a shot term pullback. Time diversification is overlooked by many traders.

Third is through position sizing. It’s better to have a few smaller positions spread captial over various investments than it is to have one position in only one investment (eggs all in one basket).

And finally the last and one of the most important is the stop loss. They are commonly referred to as money management stops. They are not used to increase your positions performance. Instead they are there to protect you from unnecessary loss if the market moves against your position. Keep in mind when I say protective stop, I dont mean a mental stop (one floating around in your head) I mean a read stop loss order that is live in the market. Risk control should never be an option, it’s a MUST!

In short, risk control will not single handily allow you to beat and profit from the market. But without managing your risk you have no hope of winning in this industry. The key is to stay in the game long enough to start seeing gains and allowing your money to compound over time for above average returns.

Controlling risk is in each trade that is taken with my subscribers at TheGoldAndOilGuy.com ETF Trading Strategies are something I always provide. Consider joining the newsletter today and start trading with confidence.

Also stay tuned for the next part in this series Lack Of Self-Discipline!

Chris Vermeulen

Please visit my website for more information. http://www.TheGoldAndOilGuy.com

Chris Vermeulen is Founder of the popular trading site TheGoldAndOilGuy.com.  There he shares his highly successful, low-risk trading method.  For 7 years Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets.  Subscribers to his service depend on Chris' uniquely consistent investment opportunities that carry exceptionally low risk and high return.

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Chris Vermeulen Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in