Any trading requires planning strategy and a method to protect ones business with alternative arrangement to deal during times of difficulty. This is precisely Money Management and the tools used is Risk Management technique. When you are in trade, understand that only 20 per cent of trade makes all the money for you. It is not a sprint, but a calculated risk and reward technique.
It is said that for every 50 pip loss, 100 pip gain is to be attained over time that gives a ratio of 1:2. Means, for every 50 bucks that you lose, try and make out 100 bucks so that your equity is under profit. Having said that, the market takes a sudden turn that your profits will jump to negative zone so rapidly and the money management system takes a beating. Let us examine this scenario, you initiated a stop loss of 50 pips and take profit of 100 pips. You had moved your trade to a profit zone of 80 pips and market
makes a sudden turn and hits your stop loss. Theoretically your stop loss was only 50 pips, but on reality the loss is 50 + 80 that is 130 pips. This is how the Money Management system gets a beating.
When you have a credit limit of 100,000 INR and when you spend 100,000 INR on the first of January some year, you have the liberty to use it till the 20th of February on the same year. You have full 50 days to inteligently use that money and when you make up around 4 to 5 per cent in those periods, it is not a bad deal. Just before that, ask yourself a question "Is there a method to make around 5 per cent during this interim period ?" You will get the answer when you read out this article. Though this may sound easy for some, for others it may be a real difficult exercise. Debit cards do not have this facility as you need cash upfront in your account.
In actual terms, making a daily profit of 0.25 per cent on every existing capital can bring you more than hundred times of your equity in just under 7 years! But the sustenance lacks focus once a sizable profit is achieved and the human emotions and greed will spoil all the plans, leading to very low profit or marginal loss. Just imagine Infosys or Wipro who made many millionaires!
Look at this example as to how I approach to trade and markets. No investment is to be closed unless it is stopped out of the system. I refer to system that I follow, for example I bought Infosys at 100 Rs, with an initial stop loss of 5% i.e. at 95 rupees, now the market rate is 200 rupees, I put a stop loss at 50 rupees i.e. at 150 rupees and I call this a system. I give a stop loss range of 25% at least once the investment is in good profit. After a couple of years, when the price is around 1000 rupees, I keep a stop loss of 25% on 1000 rupees that is for 250 rupees, say at Rs.750 (1000-250). When the price is around 2000 rupees, the stop loss is 500 rupees say at 1500/-. Instead of closing the trade manually, I allow the system to close or rather you get stopped out. Once you are stopped out, that company is never my choice and I switch to other sector. There are many other places to invest apart from stocks and CFDs, its the metals like Gold and Silver and Currencies. My main choice is currencies for the simple reason that it is closely associated to world economics and interest rates that are predictable by very simple methods. Also, it doesn't have the threat of rigging or jobbing of the brokers like the stock markets.
In reality, there is no such thing reward in the market. There is only risk. Markets are not power generating plants that produce profits to your order. The only focus for you is to control risks and you cannot determine the profits. As long as you keep controlling the risk and loss, it is easy to help your money grow. Do not forecast your profits. Plan to reduce your losses, this is the only method to control risk. The more you control your risk efficiently, the more the profit would be.
Precisely, there are many methods to reduce losses and enhance profits, even after a series of 25 losses, one profit trade can wipe all losses and put you in profit. This is possible only when the losses are pinched in the bud. Risk Management practice is too important a tool that you cannot allow your equity to erode.
I take care of your investments only in this pattern hence cannot precisely predict the daily return, but the quarterly return can be as rewarding as the other investments. There is a compounding method to allow your profits to generate additional profits, but reducing the loss is the key.
When you want to buy your dream car or house, but do not have sufficient resources to acquire that dream, don’t worry, there is always a way out and a solution that is hidden somewhere, may be the smart investment plan for instance or the smart way to manage the existing wealth that could churn out some profits, or the expert advice that you are not getting to rise the bar.
To tell you precisely how much wealth that you can generate out of the existing resource with high degree precision, get in touch for discussion. My mobile is 9494800007 and I allow you to disturb me whenever you wish.
If you know how to trade forex, you can sign on this link Hot Forex/
send me a mail, so that I can help you to make consistent profits for many many years to come.
Statutory Warning: This article is basically meant for wealthy people who can able to invest and focus on their daily routine without disturbing their lifestyle. Do not invest money that is not yours or invest only that money which is surplus to you.