Successful Trading – Taking Profits - Part 2Written by Chuck Cox
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to use a reward/risk ratio. This is a sound approach that is used more often in short term trading. The way it works is that you determine what amount you are going to risk on a given trade and then set a profit objective expressed a multiple of that risk amount. For instance, suppose you’ve bought 100 shares of IBM at $50 per share and you’ve determined that your stop will be placed at $47.50. This position has a total risk level of $250 to your account. If you’ve set your reward/risk ratio at 4:1, then this means that when price reaches $60 and your profit is $1000 (4 x $250), you will take profits. Note that using this approach with a 4:1 ratio would only require you to hit one trade in five to break even – a 20% winning percentage.
One last profit taking approach you may want to consider is taking partial profits on that first strong move. In other words, when you get that first move in your favor and you move your stop up to your purchase price, you may want to sell half of your position and take some profits early. You then let remaining position run using trailing stops until market stops you out. This approach is used by many swing traders and will result in more winners, but profits will be smaller. But remember, smaller profits mean that you need more winners.
Chuck Cox is a Technical Writer and Industrial Scientist by professional with a background in statistics. He has used mathematical and statistical methods to invest and trade in the stock, futures, and options markets. Chuck has owned various businesses and presently operates several websites. To learn more about trading the markets, visit his website, http://www.earncashathometoday.com/trading-stocks.htm
Balance Your Checkbook - A Vital Habit to Develop Written by Thelma Coleman
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At end of every month, add all your deposits together and record that number in writing. Then you add up all your expenses. Subtract expenses from deposits and add that to your beginning balance (or last month’s balance). Check your statement to see what fees your bank charged and deduct that and Voila! You have an accurate account balance! Check your figures against your current statement and you might even want to take advantage of your bank’s telephone based customer service to confirm your numbers.
If you find no discrepancies, everything is really pretty close if not perfect and you’re done – until following month rolls around. Then spend a few minutes to do it again; you’ll be very glad you did… this is time well spent and you will reap rewards of developing discipline in your financial management methods and philosophy. No surprises in mail (returned checks), no bounce fees (to your bank and merchant), and most importantly—no damage to your credit rating.
We cannot emphasize importance of developing these kinds of good financial management habits.
The Credit Counseling Foundation, Inc provides web-based education and personalized consumer credit counseling to clients and the general public in an effort to help consumers use credit wisely. Visit us at www.godebtfree.com