This week in the markets I will be trading cautiously and still waiting for more confirmation of what direction we are heading. I will be taking short term trades and day trading only as these markets now are showing some volatility. I expect the markets may rally this week, however, it will only be time before we see new highs or markets rolling over. If the markets cannot make a new leg higher and forms a lower high, that would be very bearish. Trade cautiously and I will still be looking for short term long and short positions.
The most important aspect of trading, in my opinion, is risk management and discipline. I was talking to a friend the other day sharing some of our trading picks and he was telling me a how me made a lot of money on Amazon (AMZN) because he bought some before the earnings release. I was asking him how much he bought and he said he bought a position the size of almost 100% of his total portfolio size. He was lucky that Amazon released good earnings and gapped up over 10% the next day. That kind of position is NOT proper risk management. Yes, he did make some good money on it but there are chances that he could have lost that much as well. You should not have more than 5-10% of your total portfolio in one stock. That way if something catastrophic happens to the stock, your portfolio will not be blown out and you can live to trade another day. I try not to hold stocks into earnings because it is just too speculative. I have seen stocks report record earnings and still drop over 30% the next day. As well, I have seen companies report bad results and go up 25% next day. Its too much of a gamble for me and its not prudent risk management. Sure if you want to speculate on a stock into earnings, take a smaller position, meaning less than 10% of your total portfolio. That way, even if a stock tanks 50%, you will not take a bit hit on your trading capital and can live to trade another day!
The most important aspect of trading, in my opinion, is risk management and discipline. I was talking to a friend the other day sharing some of our trading picks and he was telling me a how me made a lot of money on Amazon (AMZN) because he bought some before the earnings release. I was asking him how much he bought and he said he bought a position the size of almost 100% of his total portfolio size. He was lucky that Amazon released good earnings and gapped up over 10% the next day. That kind of position is NOT proper risk management. Yes, he did make some good money on it but there are chances that he could have lost that much as well. You should not have more than 5-10% of your total portfolio in one stock. That way if something catastrophic happens to the stock, your portfolio will not be blown out and you can live to trade another day. I try not to hold stocks into earnings because it is just too speculative. I have seen stocks report record earnings and still drop over 30% the next day. As well, I have seen companies report bad results and go up 25% next day. Its too much of a gamble for me and its not prudent risk management. Sure if you want to speculate on a stock into earnings, take a smaller position, meaning less than 10% of your total portfolio. That way, even if a stock tanks 50%, you will not take a bit hit on your trading capital and can live to trade another day!
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