Many investors are afraid to invest in the Stock Market because they believe it is too risky. What they are really saying is that they're afraid of losing money. For a new investor, this FEAR OF LOSS holds them back from achieving the results they deserve.
“You’re Not Alone”
I want to reassure you.
It’s pretty normal when investing to be concerned with the risks and losing all your money. Especially if you’re a cautious investor by nature. And many Financial Advisors will probably encourage you to avoid the Stock Market.
So if you’ve tried investing in the Stock Market before and lost money, you’re not alone. You might even be wondering, is it even possible to make more money investing in the Stock Market?
I know exactly how you feel. When I started, I felt the same way. In the early days, it was tough, especially when the market crashed in 2000 and I experienced my first significant losses.
But I was determined to succeed.
Fast forward to today and I am now consistently profitable.
I want to show you the most important lesson in making more money in the Stockmarket.
I Learned How to Manage My Risk and Reduce My Losses
Focusing on reducing your losses is the easiest way to make more money.
My goal is to help you reduce your losses so you can make more money and become financially secure.
Whether you are a complete beginner, or an experienced investor, by TAKING ACTION and implementing these steps, you will avoid the costly mistakes I made.
The fact is, making money in the Stock Market takes HARD WORK and discipline to create and HARD WORK to maintain. But the rewards are worth it.
So if you’re still reading this….great
Let's get started with what I consider to be the most important lesson…
I want to talk about Risk Management. Learning how to protect your investment funds should always be your first priority. It will ensure you are able to stay invested in the market for longer.
So what do you need to do?
The 1% Rule- Protect Your Positions
An inevitable fact of trading the Stock Market is that you will eventually lose some money. Now you may be surprised to hear me telling you this. The truth is, there is a risk associated with any investment. Losses can and will occur. Once you accept that, you need to learn how to manage them, so that you can keep them as low as possible.
Here’s how you do it.
Never Risk more than 1% of your account balance on every trade you place
By limiting your potential losses on each trade to 1%, you are able to preserve your funds and trade for the long-term.
Let me demonstrate using an example.
Say you managed to lose 10 trades in a row (which suggests you need to spend more time on your analysis!). Using the 1% Rule, you would still have more than 90% of your account balance left. This is because your dollar risk on each trade becomes smaller and smaller with each successive trade as can be seen in the table below.
Many new traders open an account with say $2,000. They start by risking $200 per trade or 10%... which to them is not much…right? If they continued to risk $200 on each trade, then after 5 losing trades, their account would have dropped to $1,000, or a 50% Loss.
They now need to make a 100% return just to get back to where they started!!
Now your emotions take over. This results in taking more risks and finding poorer trades just to get back to where you started. Your losses then start to grow even faster.
This is why up to 90% of new traders lose all the money in the entire account within the first 90 days. (Source – E-Trade Financial)
Now can you see why the 1% rule is so important??
How Much does it take to Recover Those Losses?
In trading, “Drawdown” refers to the reduction in your account balance following a losing trade or a series of losing trades.
The more money you lose, the harder it becomes to recover losses, which often surprises many investors.
Don’t believe me?
Let's take a look at the numbers...
Use Put Options to Protect your Stocks
Another great way to reduce your losses and protect your stocks is to use Put Options. For anyone new to Options, these are essentially like insurance to protect your stocks when the market price falls. By using Put Options, you will also be able to worry less about your stocks and get on with the things you enjoy.
Like to learn more? I'd like to show you how.
Here's What to Do Next
I’ve created some free stockmarket training for you and I’d like you to have it.
This will allow you to learn more about investing in the Stockmarket and our online Learn to Trade Programme. This is designed for people who want to take charge of their finances, invest for the long-term, earn more, and become financially secure.
Here’s what you will learn in this training:
How to reduce risk and invest in Stocks in a safe and steady way
How using options will allow you to create an additional monthly income and boost your returns in only a few hours per month
How you can protect yourself from the Next Stock Market Crash, so you can worry less and focus on the things you enjoy
The training is around 60 minutes and features the safest trading strategies that I recommend for complete beginners. I’ll also show you an actual trade that I placed in Netflix where the stock fell by 19% and yet I still made money.
If you want different results from the average investor, you have to start investing differently.
So if you’d like to learn how to make more money each month and protect your stocks, you’re going to enjoy this training.
Thanks for taking the time to read this!
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