Stock Market Education 5

Money management vs. Risk Management- Dont understimate either!

Have you ever found “the perfect setup” with a stock? A stock which looks like it has everything going for it, strong fundamentals, in an industry you understand, along with a great looking chart… I have personally bought heavily into some of those stocks only to be disappointed by the stock action and then take large losses. Any honest trader has a similar story.

Fortunately, I am no longer fooled by the “perfect setup.” Of course, there are often stocks which I have a strong feeling that it is definitely going up or down. I learned long ago there may be a few times when loading up on a stock will will produce large gains, but typically it DOES NOT. For me, those losses are much more difficult to get over than the short thrill of a one-off gain. Now I use and teach a strategy which provides consistent profits with lower risk. This is where money management plays a role.

The way I view it, money management and risk management are two very different and important subjects.

  • Money management is about controlling your position size in accordance with your overall account and more importantly, relative to your risk capital.
  • Risk management is about controlling the amount of dollars you risk on any given trade and making sure that the dollar amount of a loss is not allowed to do meaningful damage to your account. At Alphatrends, besides trying to make money
    on every trade (impossible) the second focus is risk management.

At Alphatrends, goal #1 is making money on every trade (which is realistically impossible but still our primary focus) and goal #2 is risk management, preserving your capital to trade another day.

The money management philosophy and decisions vary greatly amongst different Alphatrends members. Yet, risk management, the principles of; trends, stop placement and capital preservation are something we all share- because it works!

  • Do you put your capital at unnecessary risk?
  • Do you know where to get in – and out- of a stock position?
  • Do you have trouble cutting losses?
  • Are you losing money by overloading on a stock, hoping for a short term gain but are a net loser in the long term?

Both money management and risk management are required for long term sustained profits. Continue your subscription to Alphatrends and you will learn techniques to manage risk and ride your winners based on a proven strategy of actual stock action and not on random percentage or dollar levels. You’ll learn a strategy that provides consistent profits with lower risk – essential to your long-term success!

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