Learn How to Lose and Risk Management

One of the leading traders on Chicago Mercantile Exchange, because of a single trade lost everything!

For all of his years of experience and money, he had failed to master the most important concept in trading: Risk Management!

Each trader seems to have his own unique way of identifying market opportunities. One buys a stock in the hopes of never having to sell it, while another might hold a position in the market for a day or even just a few hours. Yet both individuals might be immensely successful in the markets. How can that be?

It's because every trader who has been consistently successful in the markets has mastered the concepts of risk management.

Warren Buffet's two rules of investing are:

1. Never lose money and

2. Never forget rule number 1!

Paul Tudor Jones says that he is always thinking about losing money as opposed to making money. He does not focus on making money; he is focusing on protecting what he has!

Jim Rogers, who for years was a partner with legendary hedge fund investor George Soros, said "My basic advice is don't lose money!"

Bernard Baruch, the renowned investor from the first half of the 20th century advised "Learn how to take losses quickly and cleanly."

Yet, when most people start trading, the only thing they think about is the profit objective. Countless hours are spent on discovering how to buy and sell the market with unwavering accuracy. Once they buy a market, the amateur trader only thinks about how high is the market going to go. Little effort is put into considering how low the market could go, and where they should get out in order to control their losses.

These thoughts, which are so distant from the minds of most traders, are what separate the winners from the losers.

Risk management is the practice of determining what percentage of your account to risk for each and every trade in order to maximize the expected profit potential of your trading strategy.

Once this amount is determined, this percentage must be translated into an absolute value and stop loss orders must be placed once a trade is entered in order to control potential losses at this value.

There is no guarantee that such efforts will control your losses, since the market can gap in price beyond your stop loss order, resulting in losses greater than planned.

Ioannis - Evangelos C. Haramis was born in Greece in 1951 and he studied in Greece, USA and in Belgium. He has been active in the stock markets since 1972. Since 2002 he is New Business Development Managing Director at an Investment Bank and the editor of http://www.greekshares.com/

To learn how to profit with your investments read: http://www.greekshares.com/orderbook.asp

C opyright © 2005 I.E.C. Haramis

haramis@greekshares.com

---

Diversify!

The best way to avoid being hit hard by a... Read More

Investing In Sons Business Could Cause A Real Family Feud

Q: My youngest son wants to borrow $5,000 to start... Read More

Volatile Range

The stock market fell sharply Thu and Fri before and... Read More

Useful Tips on Investing

Here are some useful tips on investing. When you make... Read More

Powerful Options Basics Lessons Improving your trading in 180 days.

An option is a traded security that is a derivative... Read More

Have Analysts Gotten Honest?

It caught my attention when I heard an analyst on... Read More

Bankers in Denial

Denial is a ubiquitous psychological defense mechanism. It involves the... Read More

The Key Ingredient To Increase Preconstruction Profits By Over $20,000

One of the greatest preconstruction investing issues that I hear... Read More

My Way Or The Highway: Give Your Financial Professionals A Good Talking To!

All this talk about Investing is encouraging lately. Over the... Read More

Is Starting A Business For Me? What To Consider Before Starting A Business

Do you have the right temperament?Starting a small business is... Read More

What My Horse Had For Breakfast

Let's see, he had some oats, fresh alfalfa and his... Read More

Are You An Investment Dummy Like Me?

I am good at a few things. I can certainly... Read More

Landlording 101, Tricks of The Trade

Looking Inside Your Tenant's Mind Basic Mind-Reading Report 101 for... Read More

Forex market offers opportunity and information

The forex market is what is called an international exchange... Read More

Stocks, Oil, and Bonds

A barrel of oil bounced to over $60 Thu, which... Read More

Franchise Investing, Franchise Opportunities and Franchising Renewals

Have you considered buying a franchise instead of trying to... Read More

Chile Leads the Latin Pack

Everyone's talking about China. Don't miss the opportunities in the... Read More

The Myth of the Earnings Yield

AbstractA very slim minority of firms distribute dividends. This truism... Read More

Waiting 20 Years Can Cost You Millions - Dont Wait Start Today

Many Young people live for Today. They really don't fully... Read More

Going Against the Conventional Investment Wisdom

First of all, I want to give everyone the disclaimer... Read More

Tyranosaurus Rex

Everyone knows T Rex was the most fearsome of all... Read More

How to Buy to Let

Find out everything you need to know about buy to... Read More

Time is Money and We Are Running Out of Both!

One of the fundamental principles of finance is the concept... Read More

Investing Pointers for Neophyte Investors

If you know next to nothing, how do you go... Read More

The Three Legged Stool

My paternal grandparents were born near Lake Como, Italy. My... Read More

Numismatics are for Collectors, Not Investors

As a precious metals investor, you may heard much about... Read More

Coca-Cola - A Value Stock?

There has been much talk lately about Coca-Cola and its... Read More

An Old Dividend Stock Investment Idea, for a New Generation

Death and taxes! The certainties of life! And then, of... Read More

Investing In or Owning Drug Lab Properties

Clean Up (includes the insides and the outside of a... Read More

June 2005: Weather Forecasts for Weather Traders

If Johannes Kepler, the renowned 17th century astronomer and discoverer... Read More

Pros & Cons of Investing in Bonds

What are Bonds?A bond is a debt security, by which... Read More

How Do I Start Investing Online and What Are Some Basic Tips?

If you are new to investing online, don't put your... Read More

The Power of Small Numbers: Trading Success is Based on Consistency, Not Home Runs

Online trading is so seductive - just sit, click, and... Read More