The first half of 2019 is almost behind us.
Have you reached your trading goals?
If you haven’t, don’t be discouraged. Success in trading is a marathon, not a sprint.
I didn’t take trading seriously until I was 50…
However, I have since gone on and made more than $2M in trading profits.
And while I can’t guarantee you’ll have the same type of success as me, when you become a client, I can assure you that I will try my best to help you cut out mistakes and develop winning strategies for consistent and smooth returns.
And you know what else?
You don’t need to trade everyday to make substantial gains in the market
You don’t need a large trading account to get started
You don’t need to go after homerun trades to make life-changing profits
And most importantly, you don’t have to put all your eggs in one basket when it comes to your trading.
(I’m with you every step of the way when you become a client, ready to take the next step? Click here to get started)
If you’ve read or heard the opposite somewhere else… I’m sorry… but you’ve been lied to.
Now, a lot of traders in Petra Picks talked about having small accounts the other day… and how you need to take on a lot of risk to make money in the markets…
… well, that’s the wrong mindset to have when you’re trading stocks.
They think just because they max out their trading accounts and place a large bet… they’ll magically make money.
Heck, even some financial advisors think the same way.
During the financial crisis… I had financial advisor who managed all my money… and I found out my account was down 50% and they didn’t properly manage my risk.
They tried to put all my money to work on some stocks… thinking they’ll all be winners and get a cut of the returns.
Well, once I figured out how to trade, I realized I don’t always have to put my money to work… and I could just place a handful of trades on, only allocating a portion of my account to them…
… and that’s one of the ways I was able to make $2M in trading profits after my financial advisor loss half of of my account.
You see, you don’t have to put all your eggs into one basket to make money…
… but some traders still think you need to put your account on the line… sometimes in just one stock to make money.
When you actually put all your chips in on one trade… you can ruin your trading account really fast.
Think about it like this… what happens if you maxed out your account on one trade… and the stock releases some news, and it tanks?
Well, your account could be ruined… and it’ll be extremely difficult for you to crawl out of the hole you dug.
Putting all your money into one stock is just one of the ways that puts you at a disadvantage… because you’re not properly controlling your risk.
Ever heard the word diversification?
Well, if you don’t know what that is… it’s simply allocating a small portion of your account to your best ideas. That way, if one of your trades don’t work out… it’s okay.
Basically, what I like to do is never risk more than 2% of my total account on any one trade.
You might be thinking, Petra, does that mean you have dozens of trades on at all times?
No, I primarily look for stocks with my best chart setups… develop a trading plan… and then only buy when it gets to my entry zone. Thereafter, I’ll place orders to stop out and take profits… and that’s just one of the many ways I use to properly risk manage my account.
The easiest rule I set for myself was to never risk more than 2% of my account on any one trade.
The 2% Rule
There’s a simple way to approach risk management.
For example, using our 2% rule… let’s say you have a $5,000 account… and notice this pattern in Perspecta (PRSP).
Well, let’s say you want to buy the stock anywhere between $22.75 and $23.25…
In this scenario, what someone who knows how to control their risk would do is buy 25 to 50 shares in between their buyzone (let’s say they buy at $22.85).
If they buy 40 shares at $22.85 (that would cost around $914)… and places their stop at $22.35… so if it goes against them and stop out at $22.35… they would only lose less than 1% of their total account.
Even if the stock gaps down 10%, they would just lose ~1.8% of their account.
That’s what we’d consider good “risk control”… and it’s one of the first building blocks to
understand when you’re trading stocks or options.
Some traders even think you have to have a large account to make money.
You Don’t Need A Large Account to Make Money in the Markets
Heather McNevin (a moderator at Petra Picks) actually showed clients how you don’t need a large account to beat the market.
For example, Heather has a small account (around $7K when she first started trading with it)… and has grown it by 25%.
One of the most important factors that helped her achieve that was controlling her risk and focusing on profits, as well as:
- Developing trading knowledge.
- Remaining patient (only hitting her best setups).
- Keeping emotions in check.
- Planning trades.
- Journaling and reviewing.
Now, she actually goes over this in an exclusive video (only available to Petra Picks clients).