By: Tom Gentile
on April 12th, 2022
Skill #4 Master Money Management Diversification
Diversification is a great way to get started with money management, and you can accomplish it simply by putting your system to work in more than one stock or asset class.
As for specific trades, try using the 5/20 rule: No more than 5% risk in any one trade, and no more than 20% of your portfolio in any one industry sector.
For More Advanced Traders
For those of you who consider yourselves more advanced traders, consider using more elaborate money management systems.
Several different kinds are available, ranging from value investing to fixed fractional and even the famous money carlo system.
Study them to determine what works best for you and your trading.
An Interesting Way to Gain more Experience in Trading
Spending some time in front of your television set watching one of the many poker playing tournaments.
Eventually, as you watch these championships, you’ll begin to recognize the same familiar faces at the final table. Are they just lucky? No. Rather, they have a constructive set of money management that they apply to their game.
They understand the probability that any given poker hand cab win or lose, and they cut out early if things don’t look good.
KEY TIP: Use the Portfolio Management Tools in my Software
Visit www.tomsoptiontools.com and sign up if you’re not already a member. Then:
Log in > Trades > Portfolio > Performance is the sequence to follow to get your trading summary that you can study, analyze, and see what you need to improve upon.
App: Toms Option Tools
Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
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