Risk Management

Article Index

The One Options Trading Lesson They Don't Want You to Learn

By , America's No. 1 Pattern Trader, Money Morning • @powerproftrades -

In options trading and investing, as with any business you're in, you want to turn a profit.

When things are going great and profits are coming in, the business is thriving. When things take a turn for the worse, your winners come less frequently, and your profits become smaller.

That's when things can get really ugly. But just like in any business, it is how you deal with losses that matters.

Today, I'm going to show you the best way to deal with losses. But to do that, you're going to have to change your whole mindset...

How to Cut Risk and Maximize Profits with Position Sizing

By , Money Morning -

position sizing

Risk management may not be the most exciting part of investing. But it's the most important.

And a risk-management tool called "position sizing" stands out above all others as the most powerful, and not just for cutting risk, but for boosting profits, too.

The concept is simple. It's about controlling the amount of money you place in each trade.

Here are three different methods for sizing your positions...

Liquidity Liquor and the Battle Ahead

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

Equity markets have been charging ahead for a few weeks. Not just here in the U.S., either.

They've been rising in Europe too. Even China's Shanghai Composite, after falling 22% last year, has been percolating higher.

Thanks to the ECB filling Europe's punchbowl, last year's sovereign debt hangover has been mellowed by some 100-proof "hair-of-the-dog" liquidity liquor...

And it feels good.

This party atmosphere is infectious!

After the European Central Bank (ECB) poured some $600 billion (and counting) into the party bowl and let teetering European banks ladle themselves out as much as they could stomach, the Federal Reserve signaled that it wanted to throw in some free "shots," in the form of more quantitative easing or some other easy money contribution, to make sure Europe isn't the only party house on the block.

And now the International Monetary Fund (IMF) - the usually stodgy party-poopers of fiscal discipline fame - are trying to get themselves invited!

They know they're not usually welcome while any economic bacchanal is raging, so they're asking for donations of $500 billion to $600 billion (on top of the $400 billion in commitments they're already packing), so they can man the kegs and stills and pump in whatever juice is necessary to make the budding soiree a true world party.

It's amazing how giddy easy money makes everyone feel.

How else could we go from fearing the next "Lehman moment" to feeling like there's enough money and time for over-indebted countries and increasingly strung-out banks to heal themselves?

Don't get me wrong: I love a good party. I'll stay until the music stops, or until the punchbowl is empty. I just hope I hear the music stop before everyone realizes the punchbowl's been cracked.

There's no reason not to be participating in this rally. And there's no reason not to be aware of what's driving it.



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Will Fed Rate Cuts Have an Inflationary Impact?

By , Contributing Editor, Money Morning -

When Federal Reserve policymakers announced the half-a-point cut in interest rates last Tuesday, I was almost at a loss for words. As all of you know, I had projected reduction of 25 basis points, and by the time Tuesday’s meeting of the central bank’s Federal Open Market Committee (FOMC) rolled around, the market supported my […]

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The Fed Has Learned Balance, as it Aids Market Recovery

By , Contributing Editor, Money Morning -

All things considered, U.S. central bank chief Ben S. Bernanke and the Federal Reserve have so far demonstrated a tremendous amount of restraint amid the credit crunch. Market volatility, tightening credit conditions, and the collapse of the subprime-mortgage-stuffed Bear Stearns Cos. (NYSE: BSC) hedge funds – as well as several mortgage lenders operating at the […]

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Credit, Consumer Worries Slap Stocks

By , Money Morning -

The credit crisis may get worse before it gets better in the coming months, as more than 2 million adjustable rate mortgages (ARMs) are ready to "re-set" - industry parlance for boosting their rates.

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