In the past 12 years of investing and trading in the stock market, I have learned a lot from my conversations with other women. For one, I have discovered many misconceptions about the stock market. In the interest of personal growth, I am open to learning new things. So, once I’ve discovered that what I used to think about a particular topic is based on insufficient information, I find myself opening up to a new perspective.
So, how do some women allow their mind to take them out of the financial game? Well, while our mind can be extremely powerful, its desire for security and resistance to change can also keep us from stepping out of the box to accomplish our goals and dreams.
Stock Market Myth #4
You have to be good at math to make money in the stock market
The key to trading and investing successfully in the stock market is using a proven system. This is the system that I have been coaching other women on for the last 7 years. Yes, reviewing stocks using this system involves looking at charts, but the calculations are minimal, and I will show you how to do all of this. In fact, I will even provide you with a spreadsheet that does most of these calculations for you. And I will show you how to use the spreadsheet.
The trading system consists of a template, which answers the necessary questions with clearly defined steps. The template will show you how to determine what company’s stock to trade as well as your entry and exit points of the trade. Calculations are used during the risk management process. When looking at risk, you want to determine two critically important things BEFORE you enter the investment.
1) What is your profit goal?
2) What is the most you are willing to risk losing?
Let’s talk about my own personal experiences as an example.
Profit Goal
If I am investing in a stock, my profit goal may be 25%. So, if I buy a stock that is priced at $50 per share, my cost basis is $50. My cost basis is what I paid for the stock. It is critical to record this information, regardless of how many days, months, or even years you have been in an investment. I put this number into my spreadsheet. 25% of $50 is $12.50. If I add $12.50 to $50 (my cost basis), I get $62.50. So, when the stock price rises from $50 to $62.50, I have hit my profit goal of 25%. At that point, using my systematic approach to investing, I use a technique to lock in my profit.
Max Loss
On the flip side, if I am investing in a stock, the most I am willing to risk (lose) is 20%. So, once again, I have bought the stock at $50 per share. 20% of $50 is $10. If I subtract $10 from $50 (my cost basis), I get $40. So, when the stock price drops down to $40, I have hit my max loss of 20%. At that point, using my systematic approach to investing, I use a technique that will automatically sell my stock.
Risk management is critical in protecting your investment capital. Why? Because there is no system that delivers profitable trades 100% of the time. No system is right all of the time. You need to have a system that tells you when to exit a trade, so that you are not making decisions based on your emotions.
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Intraday Tips
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regards
Intraday Tips
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Posted by: Nicu | 02/14/2012 at 01:17 PM
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