Sunday, August 27, 2006

Trading Points to Note

Capital Preservation

Very simple. If you don’t have money, you cannot trade. This means protecting your money is your prime concern when you trade frequently. Profits will come eventually. The best way to minimize risk is not to trade when conditions are not to your liking. Also, trading in a sideways market is not healthy for a professional trader. Volatility is alright as long as you know how to manage risk. Use leverage only if you can trade responsibly, not recklessly. Leverage is a curse for those who do not trade responsibly.
It is famously said that you should trade money that you can lose. For most of us, that amount is very difficult to define. You should spend a lot of time to think what it is for you. There are established money management calculations to help in doing this. Before starting to trade, you should indulge in judicious planning. When you have started active trading, never forget to keep the concepts of Money Management in you mind all the time.

Trading is Boring

The popular myth that draws most people to the stock markets is because they think that trading is easy and exciting. This is as far as it can get from the thruth. Trading is boring to professionals when executed well. There is Buying and Selling. But the most time should be spent in Waiting. Waiting for the right opportunity to surface, waiting while holding good positions. If you seek thrill, try the roller-coaster ride, your kids too can enjoy !

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