Forest Bergen de specialist voor Beleggers en Traders
General information only - Non Advisory
Before making an investment decision on the basis of this information, the investor or prospective investor needs to consider, with or without the assistance of a securities adviser, whether the advice is appropriate in light of your particular investment needs, objectives and financial circumstances of the investor or prospective investor.
When you buy a share always assume you have made a mistake until the market indicates otherwise, and not the reverse?
Hello, my name is Joseph Barrington-Lew and after more than 10 years of helping frustrated beginners and experienced traders understand the importance of correct Money & Risk Management principles and why they should use them, I felt there had to be an easier way to benefit from these basic principles used by successful investors & traders. Feedback from friends and colleagues found books on the subject too difficult to follow or put into practice and this still is the case, in my opinion. After a few more years of study, listening to and having long discussions with many traders - JBL Risk Manager was launched and it has helped many traders around the world limit their losses, protect their profits and monitor their trading performance by automatically removing the emotion and guesswork from their trading decisions.
The following information will be of interest to both novice or experienced traders & investors.
Assume you are wrong? More than 90% of traders lose money in the share market!
So doesnt it make sense to do the opposite of what the majority are doing?
Some of the best Traders in the World only get 50% of their trades right, in other words, they only make money 50% of the time. The difference is successful traders exit immediately when the evidence indicates they have got the trade wrong, and when in profit let the market signal when to get out and not their friends or emotions (fear of loss/ego).
After buying that share always assume you have made the wrong decision because the chances are you probably have! Itll be easier to sell and close that losing trade if you feel youve made the wrong decision in the first place. Dont simply say this share is for the long term anyway as it keeps falling.
e.g. Ive made 100% profit on this share, Im not greedy, and Im getting out.
What this trader is actually saying is - Im afraid of losing all my profits or if my colleagues find out I could have made 100% profit and it then went down they may say I was too greedy. These inexperienced traders cant wait to tell their colleagues how well they did recently, but they never talk about their losses unless they chose to give up on the sharemarket and decided to invest their many elsewhere. What we need is a Trading System or a list of simple rules to follow, the discipline to act on them and accept you will have losses.
Requirements of a Trading System
Entry Strategy - Education & Experience
Trade Sizing Strategy - Money Management - How many shares to BUY
Exit Strategy - Risk Management - Minimise any Loss with a Stop Loss Price & SELL
Profit Taking Strategy - Protecting Profits on the way up, when do I SELL
All or nothing?
All 4 strategies of your Trading System (Rules) must be in place before making that trade (Entry, Trade Sizing, Exit & Profit Taking), otherwiseâ€¦.
Trade 1. You have $20,000 to trade with so you buy 20,000 shares of XYZ Co. @ $1.00 / share. You have your exit price (stop loss) set so that if the share price drops 10% ( 90c ) you get out, and it does. Remaining Trading Capital $18,000.
No Trade Sizing Strategy, minimize risk!
Trade 2. Once bit, twice shy, they say, you are now a little more cautious and only buy 5,000 shares of ABC Co. @ $1.00 / share but it goes up to $1.30 (30%) you decide thats great profit,Im not greedy and sell. How can you lose taking a profit?
Ive made $1,500 - you tell your friends, this is great, you think, but you lost $2,000 on your first trade, your in fact down $500 to $19,500?
No Trade Sizing Strategy! No one share should feel better or worse than the other, the share either fits all your Entry rules or it doesnt, donâ€™t get personal!
No Profit Taking Strategy! Dont let your emotions tell you when to Sell, the market and your Profit Taking exit strategy will do that, who knows how much higher it may have gone?
After 10 or 20 trades this can get out of control & hard to manage!
Money & Risk Management is very important, if not the most important issue that must be addressed by anyone serious about trading the Markets and being successful by making a Profit.
M & R M will preserve both your Initial & Accumulated Trading Capital. You may already have a great entry system or a set of rules to determine what to buy but if your method of Money Risk Management is clumsy, you will lose money, needlessly!
Once a share is purchased your role is no longer as a Trader but a Risk Manager.
At some point in time your trading system will meet a draw down period (losing streak) and if you donâ€™t know what to do, you will lose your feeling of control and try desperately to trade your way out of this crisis but too many people feel despondent and abandon a perfectly good trading system, or give up trading altogether with large profits still to be made. As a Trader, youâ€™re destined to fail without a proven Money / Risk Management strategy or rules. Managing the Capital in your account, controlling the risk it is exposed to, the size of each trade, together with entry/exit strategies are all pre-requisites of any Money/Risk Management System and successful trading or investing but Remember - There is no Holy Grail for trading!