In this day and age of online brokers for virtually every market out there, there are some very useful tools that will help protect your account and lock in profits when you have them. It is our recommendation that you use a good online broker and take advantage of not only the low commissions they offer, but also the automated tools that are available. These tools are virtually idiot proof if you use them. The number one reason that people’s accounts go belly up in the markets is because they lack the discipline to stick with their trading plans and let emotions drive their trading decisions. This approach is a guaranteed way to lose in the markets. Oh, you might get lucky on occasion, but eventually the market will take your money. Let discuss some of the trading tools we’re talking about.
Stop Loss – Also called a “stop”, this is the price at which your position will be automatically closed. If you buy IBM at $50 per share, and then enter $45 as your stop level, then your position will be sold when the price hits $45. So this enables you to protect your account from a large loss. Bear in mind, however, that this stop level only “triggers” the closing of the position and doesn’t guarantee you’ll get out at that price. A quick price drop might mean your order was executed at $42 instead of $45 because of market volatility – but this would be an extreme case. Also, if you carry the position overnight and IBM opened at $40, then that’s the price it would be sold. Keep in mind that if you had “shorted” IBM at $50, then your stop would be placed above $50 to protect your account. When the stop is triggered on a short position, you would be buying to cover the position.
Buy Stop – The description above pertains to a “sell stop”, but there are also “buy stops” that can be very useful. These are used to enter a position at a certain point. Suppose you’re using a trading system requires that you buy when a stock breaks above a certain price level. Let’s say that you are waiting for IBM to break out of a channel and to do so, it would need to reach $51. In this case, you simply place a buy stop at $51 for the number of shares you desire and your online broker’s system will buy that for you automatically whenever IBM hits $51. The only thing you would have to do and check back occasionally to see if the order has been filled.
These two tools, the sell stop and buy stop are invaluable to traders – especially those who are just starting out. Make this a habit from day one in your trading – ALWAYS place a stop loss immediately after getting an order filled. Obey this rule and the market will never hurt you very badly – you’ll take a hard sting every now and then, but you’ll stay alive to come back another day!
Building Wealth: It's An Inside Job – Part 2
Let’s quickly review the principles discussed in the first part of building wealth. We established that prosperity consciousness must first be developed mentally to acquire any real wealth. A person that constantly worries about money most likely is living in scarcity consciousness regardless of the size of his or her bank account. We talked about some methods and daily exercises that can be employed to start developing a stronger level of prosperity consciousness. The first exercise uses written affirmations, the second utilizes visualization, and finally we need to become more aware of how willing we are to give and receive prosperity on a daily basis. If we start using these methods, we’ll begin to see gradual changes in our lives that will become larger over time.
Successful Trading – Taking Profits - Part 2
Suppose your position has made a big move and you moved your stop to your purchase price as recommended. Then let’s say your stock continues to make a big move and now we’re asking again the questions we asked back in the first paragraph. The first profit taking technique you can use is a trailing stop. If you moved your stop to your purchase price, then you’ve already used a trailing stop. Now you can continue to move your stop up as the price rises until the market “stops” you out of the position. So in essence, what you’re doing is letting the market decide when to take profits.
Cultivating a Prosperity Mindset: The Foundation of Wealth Creation – Part 1
Creating wealth is more than just crunching numbers and setting financial targets; it's a deeply personal journey that starts from within. Our relationship with money is shaped by our upbringing, cultural background, and individual experiences, which can either propel us towards financial success or create barriers that hinder our progress. To truly build wealth, we must first understand and enhance our prosperity consciousness, aligning our thoughts and actions with the abundance we seek.
