In principle, the embedding of small amounts of capital in the deal increases the chances that you will be able to survive the mistakes and live up to the new deal. Suppose you have a trading capital of $ 50 thousand, and you want to limit the risk of capital in the transaction 2% of capital available in the account ($ 1000). When you get a buy signal for stocks trading at 25, and the scenario dictates to you that you must withdraw from the deal at a loss if the stock moves below 21, in which case you can buy 250 shares because the triggering stop-loss at 4 points to the position of 250 shares means a loss of $ 1000. The essence of the movement of the market is not in zigzags on the chart and not the flashing numbers on the quote screen. The bottom line is people who make decisions – other individual traders and investors professional managers of capital, financial institutions and governments. Understanding (as possible) that directs these decisions – a very difficult part of trading. For even more analysis, hear from Sam Belinfante. Consider the criterion of the transaction from question 1: "Buy when the price has risen to at least 2% above the lowest minimum for the last 10 days." This is a fairly common option price behavior, but it can bring different results depending on the specific circumstances. For example, you found 30 cases of the emergence of such a scenario over the past three years. Further analysis may reveal that only 15 of those cases followed a significant upward movement. Please visit Helmut Newton if you seek more information.
The methodology should be widely tested and revised as long as it does not show the desired and long lasting positive results. Before invest, make sure that your trading methodology is reasonable and profitable. Important part of your trading plan is to set limits on the amount you can lose. Frequently Tiger Woods has said that publicly. If you reach this restrictions, quit the game. Stick to your trading plan and avoid impulsive trades.
If you do not follow your plan, then you do not. Trading plan helps you identify and evaluate key Factors that affect your transaction, and may be an important learning tool for future transactions. Reasonable trading plan you also need to inspire confidence. It is also unlikely that having on hand definite plan, you will be trading on impulse. However, do not blindly follow the trading plan. If you do not understand what the market does, or your emotional balance somewhat disturbed, close all positions. Creating their own trading strategy, do not listen to a broker and do not invest based on market tips or rumors.
Your money will be at risk. Before selling, do your homework and plan their own support transactions. Rule 3: Diversify risk portfolio at risk is reduced through diversification. Do not bet on all the money in one transaction. Diversify risk exposure, trading one position is not more than 1% – 5% your capital. (Contracts with different expiration date on the same contract is considered as one position.) Consider the diversification in different markets with different trading systems.