Introduction to Risk and Risk Management

Risk

Risk is the amount of money you are willing to, and could possibly, lose if your trade or investment is not successful.

Risk Management

Risk management is the planning and strategy developed to reduce your risk – or the amount of money you might lose – in the stock market.

Some people say you should only risk 1-2% of your entire portfolio per trade. This means you are only willing to lose 1-2% of your entire portfolio.

Example of Risk Management

Your entire portfolio value is $10,000. The stock you want costs $2 per share, and you want to buy 1000 shares. Total cost to purchase the 1000 shares is $2000 (not including commissions).

Risking 1% of your entire portfolio value: You will risk 1% of your entire portfolio, or $100 dollars. The share price you should set a stop loss at, with 1% risk, is 1.90 per share.

Risking 2% of your entire portfolio value: You will risk 2% of your entire portfolio, or $200 dollars. The share price you should set a stop loss at, with 2% risk, is 1.80 per share.

Trader’s Toys: Computer Monitor Stand for Six LCD Monitors

Trader’s Toys: Computer Monitor Stand for Six LCD Monitors

Computer Monitor Stand with Six LCD Monitors A trader never seems to have enough screen space to display all the charts, quotes, Level 2, streaming news, and order entry page they use on a regular basis. The Computer Monitor Stand for Six Monitors from Ergo In Demand solves this problem.

The monitor stand for 6 LCDs from Ergo In Demand is a low cost way for traders to significantly expand their available screen space. You can add monitors as you need – perhaps starting with 2 LCDs, then adding 2 more as your budget or trading needs demand.

These monitor stands are not only good for traders and investors, but also web designers, programmers, power eBay sellers, and computer geeks like myself. Plus, they look pretty cool.

Basic Info on the 6 LCD monitor stand

  • Price: $549.95
  • Colors: Silver or Black
  • Monitor size limit: three per row, up to 19″ standard monitors.
  • Limited Warranty: free of defects in material and workmanship for 10 years.
  • Optional lockable Quick Release allows fast interchange of LCD monitors. (RECOMMENDED)
  • Web Site: Computer Monitor Stand for Six Monitors at ErgoInDemand.com

My Watch List: VTI – Vanguard Total Stock Market ETF

Total Stock Market

The Vanguard Total Stock Market ETF (Ticker: VTI) has been added to my Watch List.

VTI tracks about 95% of the top U.S. common stocks, totalling over 1,200 different US stocks. The stocks VTI tracks cover all U.S. markets: NYSE, AMEX, Nasdaq and OTCBB stocks.

Advantages of VTI

VTI is very diversified and when you buy the VTI ETF, you’re buying a small piece of over 1,200 different stocks in the US stock markets. VTI offers a long term, low volatility play for investing. When the markets go up, VTI will go up.

Disadvantages of VTI

Being very diversified, you may miss out on gains from investing in invidual stocks. VTI holding are very spread out, which means your total return on VTI will be about the market average. You shouldn’t expect to sigificantly “beat the market” with VTI. When the markets go down, VTI will also go down.

Related Links

Added to My Portfolio: I Bought China

I Bought China

My portfolio has grown a little bit bigger. I bought the PGJ PowerShares ETF which is an ETF focused on China stocks.

I am looking to hold on to PGJ for at least 1 year and I will likely add to my PGJ position.

China

Investing in China was an easy decision for me to make. China has over 1 billion people and this number is rapidly growing. As the Chinese population makes more money and more people enter the middle class, the number of investors will surge, as will the prices of goods. More people will be investing in Chinese stocks. And people will be paying more at the stores, which is more capital for Chinese businesses.

I purchased a PowerShares exchanged traded fund (ETF) – PGJ – comprised of a number of China stocks and ADRs traded in US markets. PGJ is the Golden Dragon Halter USX China Portfolio. My goal with PGJ is to capitalize on the growth of China and to diversify my ETF holdings with some international flavor.

PGJ Info

Last Price: 16.93

Top Holdings:

  • CHL – China Mobile Ltd.
  • PTR – PetroChina Co. Ltd.
  • HNP – Huaneng Power International Inc.
  • CHU – China Unicom Ltd.
  • SNP – China Petroleum & Chemical Corp.
  • LFC – China Life Insurance Co. Ltd. (ADS)

Related Links

Ideas in the Works

TradingWinner.com Updates

I am putting together some new articles and other ideas I think should really enhance TradingWinner.com.

The articles will cover trading and investing strategies including creating trading & investing plans.

A major feature will be stock price quotes and charts available for every stock.

I am thinking of setting up forums. Would anyone use them? I think the primary focus for forums would be for newcomers and beginners to ask questions. Is anyone interested in this?

I’m also putting a new design together and hopefully TradingWinner.com will have a fresh new design later this month.