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by Dave

When using Stops is Not Appropriate

Mar 25, 2013 at 8:12 am in Risk Management by Dave · Leave a Comment »

The primary problem however with stops is the knowing just where to place them. But the purpose of this piece is not to suggest at what percentage level a stop should be placed. No, the idea behind this is to illustrate one prime trading strategy where a stop loss can actually be detrimental to your account.

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Diversification: When Many Baskets are Only One

May 12, 2012 at 7:23 pm in Risk Management by · Leave a Comment »

Diversification is a familiar term to most investors. But one has to be careful. There’s nothing wrong with investing in a FTSE tracker or spread betting the UK 100 index, but don’t go thinking you’re diversifying. If the FTSE falls (on average) then you will lose money on your single bet, and if it rises (on average) you will make money on your single bet, and it’s as simple as that.

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Double the Risk for not Double the Profit

May 8, 2012 at 11:34 pm in Risk Management by · Leave a Comment »

Going into a position all gung-ho with a double initial position size may well generate more profit compared with pyramiding into the position gradually, but it won’t give you double the profit for the double initial risk you are taking!

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Don’t Put All Your Eggs In One Spread Betting Basket

Mar 19, 2012 at 1:29 pm in Risk Management by · Leave a Comment »

Did you read the shocking news about the trouble at WorldSpreads, and did you then visit their web site to be greeted with the following message from the administrators?

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Have you “Stress Tested” your Spreadbet Portfolio?

Mar 12, 2012 at 5:06 pm in Risk Management by · Leave a Comment »

In this article I’d like to encourage you to stress test your spread bet portfolio, to discover how you would cope in the event of a market meltdown.

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When to Guarantee Your Spread Betting Stop Orders

Jan 24, 2012 at 9:40 pm in Risk Management by · Leave a Comment »

For some time I’ve not really been a big fan of guaranteed stop orders due to the costs involved and the fact that good diversification across a number of positions should provide adequate protection against individual price shocks.

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Only Insure The Risks You Can’t Afford To Take

Jan 10, 2012 at 1:16 pm in Risk Management by · Leave a Comment »

Everyone is trying to sell you something these days, and that something is usually insurance. Have you ever tried walking out of a mobile phone shop with your new phone and no insurance policy?

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Don’t invest what you can afford to lose!

Dec 29, 2011 at 4:01 pm in Risk Management by · Leave a Comment »

There is an old saying that you should “only invest (or speculate) with money you can afford to lose”. But this is not good for high earners, because….if you think you can afford to lose a lot of money, you probably will. I know this from past experience, or rather from past inexperience.

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Reader Question: Why Not Equalise Risk and Reward?

Nov 11, 2011 at 5:24 pm in Risk Management by · Leave a Comment »

When running a previous Trading Trail public trading run one of my readers asked me why I didn’t equalise the risk on my various positions. The point is that, since I establish all positions at £1-per-point, a position in a 10p stock carries a £10 risk whereas…

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Risk Management: All About Risk

Nov 8, 2011 at 5:04 pm in Risk Management by · 1 Comment »

In trading circles we talk about risk a lot. But what exactly is it, how can we measure it, what can we do to avoid it or contain its effects, what should we do when it happens, and (hey!) can it be good as well as bad?