Diversification

  • Posted on January 27, 2016 at 3:27 am

To be effective, Diversification should include securities that are not highly correlated with each other (ie do not move in the same direction at the same time). Reduces the high positive correlation benefit from diversification. Closely monitor the relationship between all of their positions, debalansiruyte and adjust your portfolio. Rule 4: Do not invest all your money before you make a deal, make sure you have enough capital to offset an unexpected loss. If a deal looks possible unexpected profit, then maybe you are too optimistic. Markets generally are rarely as good as they can seem at first glance. If the market suddenly turns down, it's wise to have at the disposal of some assets, to compensate for small losses, or demands for additional margin.

Rule 5: Use stop-loss pre-defined stop-loss limit the amount of risk and reduce your losses in fast-changing markets. Michael Chabon takes a slightly different approach. Adopt a strict rule of stop-loss, for example, quickly get out of the game, if losing 5% -7%. Even the most experienced traders, not to mention lucky, use stop orders to limit the amount of risk. Accept the commitment to withdraw from the game, if your plan does not work. Brake lights are required in order to protect you. Use them when you start the game.

Some traders use stop-signals in time. If the market does not behave as you expect, get out of the market, even if you do not lose money. Stoplights on time a reminder that you should withdraw from the market, not sure if that actually happens.

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