| Australians own more shares per capita then any | | | | exit the trade, even if you are in a losing position. |
| other nation on the planet, with more than 54% of | | | | Many traders place a stop-loss 5% below the value |
| our population owning shares. | | | | of the shares when they purchase them. This means |
| Until recently, most share investors bought shares | | | | that they should not lose anymore than 5% |
| and let them sit in the bottom drawer. With | | | | (excluding slippage and volatile market movements) |
| improvements in technology and an increased | | | | of the value of their share trade. |
| awareness and responsibility for financial planning, | | | | As the share price rises, ratchet up the stop-loss so |
| thousands of people are becoming share traders, | | | | that it is always 5% below the value of the shares. |
| buying and selling shares on a regular basis. And you | | | | The 5% level is indicative only. You must determine |
| can see why! | | | | your own level of risk for each share trade you |
| Over the past couple of years, certain company | | | | make. |
| share prices have risen well over a 1000%, some | | | | The best traders in the world know the power of a |
| over 5000%! So the temptation is extremely strong | | | | disciplined trading approach that incorporates |
| to start trading shares, rather then just sitting on | | | | stop-losses into every trade. For example, if you |
| them, especially when most of our blue chip | | | | made 20 trades, and out of those 20 trades, 10 |
| companies have recently fallen in value. | | | | were losses, you can still make money. How can you |
| Well, what goes up, must come down and most of | | | | make any money when 50% of your trades are |
| those companies that skyrocketed over the past 18 | | | | losses? Well consider this. Let's say, as an example: |
| months have not only run out of steam, but have | | | | 10 trades lose the maximum of 5% |
| come screaming back down, producing staggering | | | | 3 trades make a profit of 5% |
| losses for investors who have held on. | | | | 2 trades make a profit of 10% |
| Now, I'm sure I'm not telling you something you don't | | | | 2 trades make a profit of 15% |
| already know. However, it is amazing the number of | | | | 2 trades make a profit of 20% |
| people who still view the market as a free lunch, and | | | | 1 trade makes a profit of 30% |
| do not practice safe trading strategies. They expect | | | | Overall, our portfolio would rise 4.25%, as the higher |
| every share trade they do to provide excellent | | | | returning shares cancel out the losses, leaving the |
| returns and then panic when their trades go against | | | | balance as profit. This is the reality of trading. |
| them. | | | | Accepting losses AND wins, but keeping the losses |
| Successful share traders all around the world have | | | | small, and letting the profits run. |
| different trading strategies and systems, however | | | | The other aspect to successful share trading is |
| they all agree on one basic principle, keep your losses | | | | excepting reasonable returns. As most share trades |
| small and let your profits run! | | | | last between two weeks and two months, our 4-5% |
| Throwing darts at a dart board as a share selection | | | | return is pretty good. It certainly beats bank interest |
| technique might sound a ridiculous way to choose | | | | rates, when considered over a yearly period. |
| share investments, but highlights the fact that | | | | However, many novice traders try to make every |
| choosing shares to buy is not as important as | | | | trade the BIG score. In fact, one popular technique is |
| managing each trade once you've entered the | | | | to place all the available investment capital onto one |
| market. Most traders enter trades based on rumours, | | | | or two different shares. |
| tips and chat lines, which are really no better than | | | | This is gambling. In this case, you're much better off |
| using the dart board. However you choose to enter | | | | at the casino, as you won't pay tax on any winnings. |
| the market, be sure to adopt a strict STOP-LOSS | | | | This is not a sensible or recommended trading |
| strategy. | | | | approach. Successful traders spread their capital over |
| STOP-LOSS | | | | 10-20 separate trades to minimise the risk and allow |
| A stop-loss is a predetermined point at which you will | | | | for losing trades. |