Risk Management
by Greg Secker on Mar.09, 2007, under Education
- The risk on each trade does not exceed the predetermined acceptable level of risk
- The risk on each trade is worth the potential reward
- That procedures to manage these risks are followed
- The cumulative portfolio risk does not exceed the predetermined levels
- the purpose of managing our risks is to preserve our capital so we can continue investing over the long term
- It covers both risks for individual trades and portfolio risk
Managing the Risks for an Individual Trade
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•The risk on each trade does not exceed the predetermined acceptable level of risk
- Risk should not exceed 1% of portfolio
- The risk on each trade is appropriate for the potential reward
- Reward ratio minimum of 3:1
- Use Trademinder (TM) to calculate £/point and reward ratio
Follow the Procedures:
- Always place your stop loss at the predetermined level
- Always use the pounds/point you calculated – never more than that
Portfolio Risk:
Limit Sector Risk
Suggested limit per sector is 3%
That is, no more than 3 concurrent trades in any sector
Limit Portfolio Risk
Suggested limit is 12%
No more than 12 trades open at one time
September 5th, 2007 on 10:21 am
have you got any charts ,to illistrate your point…would make understanding 100 times better.thankyou