The financial market is a beast!
It is full of complex technical data, chaotic volatility swings, and a slew of multi-billionaires playing the game and winning. So, why not me? This was my first thought when I learned of options and commodities some 25 years ago — why not me?
It was fascinating to watch charts and the fluctuating candlestick bars move across my screen. I was hooked, I had to be a part of this game. The only problem…I didn’t know the rules and I became no better than a gambler. I wrote about my $10,000 loss in 15 minutes in a previous post, and how it was the most expensive lesson of my life.
Yes…betting on Wall Street is a gamble, but only if you don’t know how to play the game SMART.
There are specific rules of engagement you must follow whether you choose FOREX (Foreign Exchange), Options aka Derivatives, or Stocks. There are also a multitude of strategies that can be implemented. But even with the best game plan, there no guarantees for a winning position. However, you can manage the potential loss and limit your risk.
Today, I own several trading accounts. This is my way of managing my portfolio for the types of strategies and the maximum risk allocations I have set for my wealth creation game plan.
As a more conservative trader, my risks are defined, meaning I have a determined amount that I am willing to lose on each trade. I NEVER lose more than 50% of that determined amount, because I exit the trade before a full loss. This is one way you can preserve capital and move on to the next trade.
There are three rules that I think are critical to trading on any platform:
- Research – Just because the market is moving in the direction you want it to now, doesn’t mean that it will continue to do so tomorrow. Researching the 52-week hi/lows of a equity, the current trend of the equity, and the related news to the equity will help to give you a strong idea of what the equity will do in the near future. Do your homework before placing any trades.
- Decide Your Loss Limit – This is important because, if you are not willing to lose anything, you cannot hope to gain anything. Taking risk is part of every single trade you make. You must enter the game knowing that there is a chance you will lose.
- Nix Emotions – Get out of your heart and emotions and be willing to let go of losing trades early. The idea that a losing trade will somehow turn around in your favor because you want it to, will break you and blow up your account.
Trading is a fearless game. You cannot trade effectively if you are ridden with fear of losing. To do so would indicate you are in your emotions, and well, you have broken rule number 3.
Once you can can come up with a solid strategy for winning in trading options, forex, or stocks, you will build your confidence with each winning trade. Over time, you will place bigger trades, and see bigger rewards.
After all these years, trading is by far still one of the most thrilling things I do for myself.
Here’s to your remarkable life & legacy!
Trading forex, stock, options, and exchange traded funds (ETFs) is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using this methodology or system will generate profits or ensure freedom from losses. This information is for education purposes only and not personal finance advice.