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If you are investing in stock, or if you buy stocks, trade stock, or are into stock investing, read this section to improve your stock trading skills.

Buying and selling stocks involve risk. If you buy stocks, sell stocks or trade stocks, you should incorporate risk management into your trading plan. Here is one method to manage risk involved in trading stocks.

Tip. The crucial element in risk management is knowing when to exit a trade that is going against your position. we believes that this should be planned prior to entering the trade. None of us are perfect traders, and we do make mistakes. We either buy or sell the wrong stock or our timing on the stock is not correct. Trading many times is a humbling experience. So at some point, you have to swallow your pride, and cut your losses. We believe that an unemotional but an objective way will be beneficial in the longterm. provides a reasonable approach to this question: when to cut your losses. We believe that the amount of money that one should risk on a particular stock depends on the volatility of the stock. If you risk too little on a trade, you may lose the opportunity. For example, BIDU, a Chinese Internet company, is very volatile, as well as rewarding to many traders. If you risked 3% by setting a stop order or by exiting the trade, you would most likely exit the trade too quickly. Basically, because the stock is volatile, you need to risk more then 3% when trading BIDU.

Similarly, a trader should not risk more than what is required on a trade. For example, risking 20% on GE trade does not make sense. Bidu and GE have different volatility profile. risk management numbers intend to provide a balance. We incorporate the volatility profile of a stock, and crunch the numbers based on past behavior of the stock to come up with a reasonable estimate of how much you should risk on a trade. There is a no method to calculate the optimal amount. However, we believe that a reasonable approach over a long term will pay off.

Based on the volatility of a particular stock, we provide a range. For example, you bought a stock at $100.00, the risk management section suggest you risk between 3% and 7% on a stock. In such a case, you may hold on to the stock until it reaches $97 to $93. This is based on the thought that 3% to 7% is a normal fluctuation of prices in that particular stock. However, we suggest that if it falls below 7%, you should seriously reevaluate the assumptions you made when entering the trade.

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About the website: For those who want to trade stocks or invest in stocks, provides stock market quote, stock research and stock analysis. Based on technical analysis(a stock charting and trend technique for trading stocks), and our automated trading tool can help you trade with confidence, learn when to buy stocks, learn when to sell stocks. If you trade with stock brokerage, or financial advisor, this website will provide you with valuable information. It is a useful trading system.
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