Risk and Reward Investing

Written by John McKeon


Continued from page 1

Now what if you are trading stocks with an entry and an exit point already predefined; that is where do I get in and where do I get out. That strategy might be good but that is not risk and reward. The most important question is how much am I invested and how much do I get out. What isrepparttar % of risk on each stock position inrepparttar 112255 portfolio and what isrepparttar 112256 risk torepparttar 112257 total portfolio. Let’s take an example. You bought 100 shares IBM @50 for $5000 in a total portfolio of $200.000. You put a sell stop loss to sell all 100 shares if IBM goes to $40 / share. That means your risk on IBM is $10 / share or $1000. But your real risk to your portfolio is .5% or $1000 divided by $200,000. If you have a sell exit point of $100 then your reward onrepparttar 112258 stock would be 100% andrepparttar 112259 reward to your total portfolio was 2.5%. So your total risk to reward was 5 to 1. You could crunch numbers all day to make up formulas to fit your strategy, butrepparttar 112260 most important part is how much are you risking. Here are some general rules when it comes to risk: Don’t risk more than 2% on any given trade or idea. That doesn’t matter if your strategy is technical or fundamental or discretionary. Risking 1% would be safer. Most large fund managers risk much less.

Diversify. Buying 1% risk on IBM and 1% on Dell and 1% on Hewlard Packard is a 3% risk because they all sellrepparttar 112261 same products Don’t risk more than 20% of your portfolio at any one time, 10% would be better. You have to have a way to quantifyrepparttar 112262 greed factor or it might consume you and all your money atrepparttar 112263 same time.

In my own portfolios I try not to risk more than 7% on an initial portfolio position.

Initial risk and on going risk can be two different risks. As a trade becomes profitablerepparttar 112264 amount of at risk at any moment in time can be a variable not a constant. That would allow for letting profits run while cutting losses short. However, making your initial risk a variable in most cases would be a disaster. Once initial risk is conceived it should never be increased. Greed may becomerepparttar 112265 primary factor in increasing initial risk and that is always a fast track to increasing losses.

I hope that risk and reward becomerepparttar 112266 primary strategy concern in your future investing and trading.



private placement fund manager, and owner of http://ww.buypanic.com, an investment newsletter. I ahve over 24 years trading experience, specializing in stock index trend following. I alos have experience in volatility based money management principles. Buypanic.com offers valuable insight on both stock strategies and money management.


Worried About Debts?

Written by John Mussi


Continued from page 1

Managing Your Auto and Home Loans: Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Debt Consolidation: If your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debtrepparttar fastest way possible, then a debt consolidation loan could providerepparttar 112254 answer.

Are you paying out too much every month for your credit cards, store cards and loans? Then why not replace them all with one, lower, convenient repayment through a consolidation loan?

Consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest.

Secured on your UK home, low cost, low rate, cheap, low interest debt consolidation loans can sweep awayrepparttar 112255 pile of repayments to your credit and store cards, HP, loans and replace them with one, low cost, monthly payment – one calculated to be well within your means.

With a Debt Consolidation Loan you can borrow from £5,000 to £75,000 and up to 125% of your property value in some cases.

A UK Debt Consolidation Loan is a low cost loan secured on your UK home. It frees uprepparttar 112256 spare capital (or equity) in your home to repay your store card and other debts.

It can reduce BOTH your interest costs AND your monthly repayments, putting you back in control of your life.

Debt Consolidation Loan rates are variable, depending on status

Your monthly repayments will depend onrepparttar 112257 amount borrowed and term.

You may freely reprint this article providedrepparttar 112258 author's biography remains intact:



John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available online loans via the http://www.directonlineloans.co.uk website.




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