Your long term success as a trader depends on how you manage risk in the market. The golden rule of trading, protect your capital, let your profits run and cut your losses short. Trading is all about managing risk and taking measures to limit your losses and sticking to disciplines. I’ve wanted to get into this with all of you for some time now. Now that I have had some time between the holidays to address this. I am hoping this email helps you all become more successful traders.

I have noticed in some emails some of you are new to trading stocks. Some of you don’t know when to buy, sell or hold. I know that emotions play a big part in trading stocks. I’m hoping this email will clarify and help you all become better traders. For those of you that are pros, bear with me and read on, you might find something helpful. I’ve been involved in the stock market for 25 years and I’m always learning something new.

Managing risk is an essential part of trading. Everyone’s tolerance to risk is different. An investor’s risk tolerance varies according to age, income requirements and financial goals, etc. For example, a 70-year-old retired widow will generally have a lower risk tolerance than a single 30-year-old executive, who generally has a longer time frame to make up for any losses that may incur in a portfolio. As far as penny stocks go? They should be a very small part of a portfolio; if any at all. You should never invest more than you can afford to lose. The key to success in trading penny stocks or any stock for that matter is to protect your capital!!

How will you limit your losses and protect your capital and take advantage of open profits once in a trade? Trailing stop losses are your key to survival when entering a trade and allow you to protect your capital and open profits.

Understanding Trailing Stop Orders

A Trailing Stop order is an order you can place with your online brokerage firm when trading stocks that can help minimize losses and protect potential profits. It is a key component that is available to help manage risk when involved with online stock trading.

Using a Trailing Stop order will also help keep emotions out of your trading decisions. Emotions can often allow a profitable trade to turn into a loss, and a losing trade to wind up becoming a bigger losing trade. Once placed, the Trailing Stop order will adjust in price based on the settings that you set upon initiation of the trade.

Some possible settings and types of orders include

• Trailing Stop Loss in dollars
• Trailing Stop Loss in a percentage
• Trailing Stop Limit in dollars
• Trailing Stop Limit in a percentage

An example would be the following:

1. You place an order to buy shares of abcd stock and are filled at a price of $1.00 per share.
2. You then place a Trailing Stop Loss order in dollars, at $.10 cents

Possible scenarios:

• If the price of the stock goes to $.90 cents or below, the Trailing Stop Loss order will get triggered and turn into a market sell order and be sold at the best available price in the market.
• If the price of the stock goes up to $1.10, the Trailing Stop Loss order will move up and adjust as the price of the stock rises above $1.00. In this case, the Trailing Stop Loss order is now at $1.00 because it will trail (follow) the stock price as it moves up by the amount you set in dollars when you placed the initial trade, $1.00.
• If the price of the stock goes up to $1.50, the trailing stop loss order would follow up to $1.40. If the price of the stock now drops to $1.40, the Trailing Stop Loss order would stay at $1.40 and would trigger and become a market sell order at $1.40. The Stop Loss order does not adjust downwards.

A Trailing stop Loss order set in percentages works the same way, except in percentages instead of dollars.

A Trailing Stop Limit order works the same way as a Stop Loss order except that once the order is triggered; it becomes a Limit order at a price that you specify instead of a market order.

Be careful where you set your trailing stop loss points. If a stock normally fluctuates 3-5%, you don’t want to set your stop loss too close to that range or it will sell the stock on a normal downswing. Trailing stop loss orders don’t guarantee against losses. When disaster strikes a stock, it may fall so fast the best you can hope for is to come out close to your price.

Trailing Stop orders are just one of the tools that are available when trading stocks that can help minimize risk and protect your capital and potential profits. There are other methods and tools available that you can use to help when developing a complete trading plan.

Trailing stop order rules, once in place, can be an extremely effective tool in managing risk. Setting appropriate trailing stop order rules and then sticking to them (that’s the discipline) will see you on the road to success! Many of you ask what to do if you’re in a position and you’re at a loss? Here is my opinion on that. This is where you have to ask yourself if you’re a long term holder or short term player. Long term? Because you like the company so much? Or do you just want to trade this stock and try to profit? Every now and then we have stocks that aren’t doing much. The best strategy in this case, in my opinion, is to limit your losses. Cut it loose! sell it due to non performance. I am of the opinion not to hold any penny stocks long term. I am a short term trader myself. There will be another trade around the corner we can capitalize on. By cutting it loose you will save your initial investment and live to trade another day.

Another question I get is when do I get out? How many times have you sold a position too early? Or too late? I know I have. And it’s frustrating! Overcoming this tendency to sell before a stock has reached its full potential is, again, about discipline!

Generally, what inexperienced traders do is, they try to pick the top. A top is a very difficult to identify. It requires great skill and some luck, and even then there is no guarantee that you will be right. Worse yet, you will be kicking yourself. If the trend were to continue upward after you had just exited the trade! Even worse than that, you can end up riding the trade down if the stock does an about face. This is a misguided strategy. You need to stick with your disciplines.

The best way in my opinion of exiting a position is to wait until the trend changes and exit at a point slightly lower than the top. This does mean that you will be sacrificing some of your profit but, in the long run, your trades will be much more profitable. You will be letting your profits run until you’re signaled to exit. For those of you that have been with us you will know that we constantly urge you to take profits when the opportunity presents itself. Do not get greedy. Consider using trailing stop orders. As mentioned, you generally want to ride the trend as long as you can. The problem is that when the trade starts to lose steam, it will inevitably begin to decline in price. This means that the best time to exit is not actually at the ‘top’ but when the share price has just begun to fall. You’ll never pick the top so make sure you exit just as it rolls over. Getting back to the golden rule of trading. It does not matter how many winning trades you have, if you can manage to keep your profitable trades larger than your losses you will survive in the market. There is no such thing as hanging on to a losing. You may have heard it from someone else or said it yourself — don’t worry the stock will come back and I will get my money back. Then again maybe it won’t!

Remember the golden rule, protect your capital, your winning trades and cut your losses early! I hope this helps you.

Best Regards,

Wallstreetshotteststock

Disclaimer: The information contained in this email does not constitute an offer to sell shares or offer advice regarding the company (ies) referred to in this email. All recipients of this information should consult an appropriate professional advisor. Wallstreetshotteststock.com is not a registered broker or registered investment advisor anywhere on this planet. We are not qualified to give investment advice to anyone. Any information in this email is nothing more than my opinion and you should take it as such. This information is for entertainment purposes only. You should always do your own research and check with a qualified professional before making any investments. Investing carries a high degree of risk and you could lose your whole investment. Never invest more than you can afford to lose.