Account Management

The best way to practice successful stock indices money management in Stock Indices Trading is for a to keep losses lower than the profits they make. This is called risk:reward ratio.

Account Management Strategies

This technique is used to increase the profitability of an investment strategy by trading only when you've the potential to make more than Three times more than what you're risking.

If you invest using a high risk reward ratio of 3:1 or more, you significantly increase your chances of becoming profitable in the long run. Chart below shows you how:

In the first examples, you can see that even if you only won 50 percent of your stock trade transactions in your account, you would still make a profit of $10,000.

Even if your win rate went lower to about 30% you would still end up profitable - Account Management Principle - Stock Indices Money Management.

Just remember that whenever you have a good risk to reward ratio, your chances of being profitable as a trader are much greater even if you have a lower win percentage for your stock index strategy.

Never use a risk : reward ratio where you can lose more pips one stock trade than you plan to make. It doesn't make sense to risk 1,000 dollars in order to make only 100 dollars.

Because you have to win 10 times to make the $1,000 dollars back. If you ONLY lose once you have to give back all your stock indices profits.

This type of investment strategy makes no sense and you will lose on the long term.

Account Management Strategies

The percent risk technique is a technique where you risk the same percentage of your trading account balance per transaction - Account Management Methods.

Percent risk based method says that there will be a certain percentage of your account equity balance that is at risk per trade. To calculate the percent risk per each stock trade transaction, you need to know two things, the percentage risk that you've chosen and lot size of an open order so as to calculate where to put the stop loss order. Since the percent is known, we shall use it to calculate the lot size of the stock trade order to be placed in the market, this is known as position size.

Example

If you have an account balance of $50,000 in your account and risk percent is 2%

Then 2 % is equal to $1,000

Other factors to consider include:

• Max Number of Open Stock Trade Positions

A final point to consider is the maximum number of open stock trade positions that is the maximum number of stock trades that you want to be in at any one given time. This is another factor to decide when managing stock account capital.

If for example, you chose a 2 %, you might also say chose to be in a maximum of 5 stock trade positions at any one given time. If you open 4 trade positions and all 4 of those positions close at a loss on the same day, then you would have an 8% decrease in your trading account balances that day.

• Invest Sufficient Capital

One of the worst mistakes that traders can make in stock indices is attempting to open a account without sufficient capital.

The stock trader with limited trading capital will be a worried trader, always looking to minimize trading losses beyond the point of realistic trading, but will also be oftenly taken out of the stock trade transactions before realizing any success out of their stock index strategy.

• Exercise Discipline

Discipline is the most important thing which a trader can master to become profitable. Discipline is the ability to plan your work and work your plan.

It is the ability to give a trade the time to develop without hastily taking yourself out of the stock market simply because you are uncomfortable with risk. Discipline is also the ability to continue to stick to your stock indices plan even after you have suffered losses. Do your best to cultivate the level of discipline that is required so as to be profitable.

Account Management Basics

Stock indices money management, is the foundation of any stock indices system as it helps investors to improve their chances to get profit trading on the stock market. It is especially important when transacting in the stock leveraged stock market, which is considered to probably be among one of the more liquid financial markets but also at the same time to be also one of the riskiest.

If you want to invest successfully in the stock market you should realize that it is very important to have an effective stock indices strategy of stock indices money management because you will be using stock leverage to place your orders - Account Management Basics.

The difference between average profits and losses should be strictly calculated, the profits on average should be more than the losses on average when trading, otherwise stock indices won't yield any profits. In this case an investor has to formulate their own account management trading rules, success of each person depends on their own individual traits. Therefore, every trader makes his own stock indices strategy and formulates their own stock indices money management guidelines based on the above guidelines.

When you're placing your orders put your stop loss orders in order to avoid huge losses. Stop loss orders can also be used to lock in profit.

Consider the chance to get profit against chance to get loss as 3:1 - this risk: reward ratio should be favorable more on the profit side.

Considering these stock indices rules and guidelines, you can use them to improve profitability of your stock indices strategy & try to create your own stock indices strategy that will possibly give you good profits when trading with it.