Think & Trade Like a Champion: The Secrets, Rules & Blunt Truths of a Stock Market Wizard

moves. One or the other must be adjusted to dial in the correct amount of risk. For argument’s sake, if you wanted to be very aggressive and put 50 percent of your account into one position, you would need to use a 5 percent stop to contain your risk as a percentage of equity to 2.50 percent. But the tighter your stop, the more likely you are to ge

The reason most investors fail to sell and cut their loss short is because they fear that after they sell the stock might go back up and they will be wrong twice. It’s driven by the fear of regret, which stems from pure ego!

In trading and in life, how you deal with losing is the difference between mediocrity and greatness. Remember, losses are a function of expected gain. The key is to keep your losses less than your gains; always think risk versus reward and base your risk on the reality of your trading results. If you can get a reasonable idea of what your gains wil

On the other hand, if you want to achieve superperformance, diversifying your portfolio too much is counterproductive.

I have some general guidelines as to when I raise my stop above the initial placement. Any stock that rises to a multiple of my stop-loss and is above my average gain should never be allowed to go into the loss column. When the price of a stock I own rises by three times my risk and my gain is higher than my average, I almost always move my stop up

at $5,000. But that’s 5 percent of the total equity of your account—and that’s too much risk. If you were to suffer a string of such losses, you would put yourself at risk of ruin. Instead of arbitrarily picking a number, your maximum risk should be no more than 1.25 to 2.5 percent of your equity on any one trade. The less experienced you are, the

Either your stop moves or your position size

Your goal should be optimal position sizing. The size of your position should be determined by how much equity you stand to lose if a trade goes against you. Let’s say you have a $100,000 portfolio and you put 50 percent ($50,000) into one position. With a 10 percent stop, you cap your loss

Expectancy is your percentage of winning trades multiplied by your average gain, divided by your percentage of losing trades multiplied by your average loss. Maintain a positive expectancy, and you’re a winner. My results went from average to stellar when I finally made the choice that I was going to make every trade an intelligent risk/reward deci