Good Investing Lessons

Here are the steps to build your own system: Designing a High Reward-Risk System for Managing Money Expectancy = (Probability of Winning * Average Win) Minus (Probability of Losing * Average Loss) Ensure Reward to Risk Ratio is above 2. That means Average Loss should be small and Average Wins should be big. Set stops that will be reasonably small. Do not enter trade is the stops has to be too large for comfort. Use systems to spot opportunities that will provide better probability of winning. NOTE: It is extremely dangerous if you are not adequately capitalized. Many traders failed due to excessive draw downs. By simple probability, the bigger player always wins against the smaller player. Technique I -Get Best Reward-to-Risk Ratio and then Leverage Yourself Have a system that can spot good opportunities. Not quite duplicable. It involve good return with small draw downs. 5-1 is not quite achievable. 2-1 is generally possible and good enough. Above that would be great. Technique 2 -Op...

Money Management is the most important component of investing and trading. Van Tharp (Definition): Money management is that portion of your trading system that tells you “how many” or “how much.” How many units of your investment should you put on at a given time? How much risk should you be willing to take? Aside from your personal psychological issues, this is the most critical concept you need to tackle as a trader or investor. “Risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least in half” - Bruce Kovner “Never risk more than 1% of your total equity in any one trade. By risking 1 %, I am indifferent to any individual trade. Keeping your risk small and constant is absolutely critical. ” - Lamy Hite “You have to minimize your losses and tv to preserve capital for those very few instances where you can make a lot in a very short period of t...