Investors and traders are always seeking the next big thing or trying to get rich by taking hot trades without calculating the risk. While this may work occasionally, it is not something that you can depend on regularly. To truly build wealth and income from market speculation you need two things: a rule-based strategy and the discipline to follow that strategy.
Many people don’t feel you can calculate risk effectively enough to be a consistently profitable market speculator. That is not the case. When you learn a strategy that allows you to know exactly how much your maximum profit as well as your maximum loss might be, that’s the definition of calculated risk. When the odds are in your favor, you win more than you lose, and you can become consistently profitable.
Traders need to minimize distractions and have a set of rules to follow. When you know your rules, and trust them, you can place your trade and let them run knowing that no matter the outcome, it was part of your plan.
Online Trading Academy’s Patented Core Strategy is designed to place the odds in your favor by mimicking the actions of the trading institutions who are responsible for moving the market prices themselves. Following this simple set of rules does put the odds in your favor and changes the game from uncalculated risk to high probability market speculation.
Take, for instance, the type of stocks to trade. Many people try to pick what are called penny stocks. They select these stocks because they are inexpensive, so they can buy many shares and hopefully strike it rich with a sharp rise in their stock. This is uncalculated risk because these stocks are too volatile and there is no guarantee that their stock will rise in price, it’s a shot in the dark.
Speculation on these stocks using the Core Strategy I mentioned above would also not work. There is simply not enough institutional participation. In the following data for SIRI, you can see even though the stock has a float over one billion shares and a market cap over $32 billion, institutions only own 19% of the shares. This is hardly enough to find high probability, low risk, high reward opportunities on a regular basis.
Compare this to the stock for EBAY. The market cap is only five billion more than SIRI’s and there are a lot less shares available. But EBAY would be a much better stock to trade and invest in since it has an 88% participation by institutions. This means that you can clearly see the patterns made by institutional buying and selling and therefore put the odds in your favor to trade it by using Online Trading Academy’s rule-based strategy.
Trading and investing with a rule-based strategy changes uncalculated risk into high probability, high profitability market speculation. Put the odds in your favor by learning the right way to trade and invest and joining a community of traders that can not only help you learn the strategy but maintain the discipline to follow the strategy on a regular basis.
On a personal note, I am writing this article in an airport lounge in Lisbon, Portugal on my way to Nice, France to get married! While you are reading this, I will be enjoying my honeymoon in Southern France and Portugal. Thank you to all friends and family who will be celebrating this joyous occasion with me. And thank you to all of my readers who enjoy the bits of knowledge I share to help improve your abilities in the financial markets.
Read the original article here - Speculation Means Taking Calculated Risk
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD stays near 1.0800 after upbeat US data
EUR/USD stays under modest bearish pressure and trades near 1.0800 in the American session on Thursday. The data from the US showed that the real GDP growth for the fourth quarter got revised higher to 3.4% from 3.2%, supporting the USD and weighing on the pair.
GBP/USD stays in daily range above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.
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