People excited about learning how to make money trading tend to forget about the risks involved with investments. Knowing how to get the most yield or return on investment while managing the riskiness of trades is the hardest lesson new investors learn. Investors who fall prey to information that is too good to be true get caught in a pattern of churning one bad investment after another until their capital is whithered to nothing.
How to Make Money Trading: Managing Risk
Managing the risks associated with investments is not only about selecting good companies or evaluating financial statements. Far too much of that stuff is either manipulated, out-dated, irrelevant or simply unreliable. Piling new investors high with data is how brokers distract a new investor from what truly matters when making a trade: price. What is the price of the shares or the bond or option? What is the price (transaction cost) of the trade? Is the quoted price of the stock a fair one today or am I being ripped off? These are the important questions any trader should be asking before hitting the buy button. Unfortunately many new to investing get caught up in the whirlwind of information and fall in love with the stock that went up yesterday rather than finding the one which will rise tomorrow. The takeaway is that managing risk involves not only finding good companies to buy, but also in understanding when it is already too late to take a position in a stock.
Getting Ahead of the Market: Learning to Run in Front
Front running the market involves finding where the cash in the market is likely to be going and getting there first.
There is far and away more art than science to frontrunning the market but it can be done. Anyone learning how to make money trading eventually finds that the biggest yields and highest return investments generally are also the shortest duration trades. Becoming an expert at finding where the world’s capital is going next is the fastest way to learn how to make money trading.