Risk Management

Risk Management

With some broker accounts, leveraging can greatly amplify returns as well as losses. If your $1000 account is invested in a stock with a 75% leverage ratio, giving you $4000 worth of shares, a 25% fall in the stock price will mean you lose your whole $1000. Any further falls will result in you owing the broker money. It’s a high risk game. A quick tip is to divide 1 by the % that you contribute (e.g. 25% as above), which gives you 4. Any movement in the stock price (e.g. 10%) is amplified 4 times (now 40%) when it comes to working out your return on capital.

Online Trading Accounts

The first question that I had, after coming up with a long list of seemingly underpriced and high risk stocks in 2008, was how to execute these ideas through an online trading account. It was a question that I think I only found the right answer for me a short while ago, although as with every subjective question, the answer varies upon the person. For me, starting with a small amount of capital (but an amount that I could afford to take heavy losses on), having the potential to generate large profits was particularly important. The three main types of accounts that are widely available are:

Introduction to my Trading Blog

This is my alternate trading blog, which aims to provide some useful advice, education and questions for those with a little less stock trading experience (or those more experienced types making sure they haven’t missed a trick). It’s simply a medium for me to share the things I’ve learnt, mistakes I’ve made, and how I would begin investing and trading if I could start over.