Stock Market Price Timing and Money Management

Stock Market Price Timing, includes more than stock entries and stock trading exit strategies.

It also includes astute Money Management, which will dictate whether or not you can make a trade on a particular stock you are interested in.

The first goal of stock market price timing and money management is to ensure survival. You need to avoid risks that can put you out of business.

The second goal is to earn a steady rate of return. And the third goal is to earn high returns...but survival comes first.

"Do not risk your whole trading account!"...is the first rule of trading.

Losers violate this by "betting" too much on a single trade. Then they continue to trade the same or even a bigger size during a losing streak.

Or they can on a lucky roll and start to "bet" their winnings away.

Good money management can keep you out of the hole in the first place. You have to know in advance how much you can lose and when and what level you will cut your loss.

Amateurs try to get rich quick but destroy themselves by taking wild risks. They get killed by either emotion or ignorance. Amateurs act on hunches and stumble into trades that they should have never taken.

If you focus on handling losses, profits will take care of themselves.


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So, how do you manage and insure your money doesn't disappear due to a couple of bad trades?

If you bet 25% of your account on each trade, your ruin is guaranteed. You will be wiped out by a very short losing streak, which happens even with the very best trading systems.

Even if you bet 10% of your account on a trade, you will be eventually broke.

This limit includes slippage (the difference between estimated transaction costs and the amount actually paid) and broker commissions.

So if you have a $10,000.00 account for trading, the most you can risk or lose is no more than 2%, or $200 on a trade.

Oh oh, let me guess, you have a small trading account and the 2 percent rule just threw a monkey wrench into your dreams of quick profits.

You know what? Most successful stock trading professionals consider 2% to high. So if you have a small trading account, be very, VERY careful.

This 2% rule keeps you out of riskier trades, which can dictate your stock market timing on a particular stock...you may not be able to trade it at all.




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Figuring Out The Stock Trading plan

• What price will you buy at? This is based upon the trading system you are using.
  
  
• What is your potential profit target? - what price you expect your stock to move to and in how long. Again, your trading system should determine this.
  
  
• Determine your initial stop loss - at what price below your buy price will you exit the trade if it goes bad. Quite often, traders will use the latest minor support level.
  
  
• From this stop-loss, how many shares can you trade in order to keep within the 2% rule? ie. If you have a $10,000 trading account, the most you can risk or lose would be $200.00.

  So if the stock in question is at $10.00, and you initial stop loss is determined to be at $8.00, that would be a potential $2.00 loss. $200.00 divided by $2.00 is equal to 100 shares maximum you can buy.
  
  

• Is the risk/reward ratio at least 3 to 1? This is determined by dividing the potential target price appreciation, by the potential stop-loss price depreciation.

  ie. If your stock is currently at $10.00, and your trading system dictates the price going to $16.00, an appreciation of $6.00. You initial stop-loss is $8.00, a loss of $2.00...$6 divided by $2 is a risk/reward ratio of 3 to 1!

In Sell and Sell Short, Dr. Alexander Elder explains stock market price timing and how to set profit targets and stop-loss orders prior to entering any trade. He shares real-world examples that show how to manage your position by adjusting your exit points as the trade unfolds.

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Stock Traders Calculator

The ultimate stock market price timing and money management guide is The Traders Calculator.

The information contained in this program will open your eyes to the importance of position sizing and money management and how it will change your profit level.

It uses a scientific and carefully calculated approach to reduce risk and maximize profits.

Click Here to Learn more.

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Recommended Risk and Money Management Tools and Resources

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