Risk Management
Risk Management
Home Run: $1, $2, $3
Base Hit: .20, .50, .80, $1
Rules:
1.Trade within your means don’t try to trade stocks you can’t afford
2. Set parameters: I try not lose more than $500 on one trade and a $2k max on the day. I still only risk 10% of my total account balance.
3. Try to maintain a 1:1.5 or 1:2 risk to reward ratio
4. Aim for a 75% success rate each day.
Ex…. $1,000 $20,000
Snap: $14.00
How many shares do you buy?
1000
Where does your stop need to be?
If you enter at $14 and you are only willing to risk $100 / 1000 = $.10… $13.90
Where is your first target?
It should always be the price which you make back what you are risking
Enter @ $14 w/stop at $13.90 and 1000 risk is $100 profit: $150-$200
1st target $14.20 why @ .20 we can sell half the position and lock in $100
500 shares * .20 = $100
We still have 500 shares left to play with. So we can move our stop up from $13.90 to our entry price of $14 and look for a push higher and take profits again around the .50 area or get stopped out at $14 and pocket the $100.