Considering Stock Trading as a Business

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					?Many people are drawn to stock trading as a business. After all on the surface it
appears to be the perfect business. I remember the first time I learned about stock
trading and how I thought that it was truly amazing to be able to make money from
anywhere in the world where I had access to a computer and/or telephone. Some of
the unique benefits include:
· no employees
· low overhead
· no physical inventory
· instant liquidity
· independent of economy
· independent of climate

People are drawn to stock trading for various reasons. Your reasons might include:

·   Making additional spending income
·   Produce capital for other investments such as real estate
·   Saving for your children's education
·   Becoming self-employed as a full-time trader
·   Building your nest egg for retirement

The Most Important Consideration in Stock Trading

Stock trading involves purchasing stocks with the motive of earning a profit in a
relatively short period of time. This means that in order to increase your chances of
making a profit, you should try to follow a proven strategy(s) that will help you grow
your capital. A stock trading strategy includes risk control policy, money management,
the method of entry and exit and also stock selection.

The fact is a good stock trading strategy is only effective if it fits your individual
personality. Why is that?. Because in the long run, you will usually abandon anything
that doesn't feel natural or comfortable. In order to choose a stock trading strategy that
fits you, it is necessary that you become familiar with the different types of strategies
traders use with the most important difference to evaluate being the amount of risk
involved. What does that mean? It means that the strategy of your stock trading
business should depend primarily upon the type of risks you are willing to take. In
general; the lower the risk the lower the return however the desire is typically for
higher returns which then always involve higher risks. Ideally finding a happy
medium regarding risk and return will create a lucrative environment for growing
your stock trading business.

Coming to term with the Risks of Stock Trading

Understanding the fundamental fact that risk, as it pertains to stock trading or
anything else, can never be eliminated; the best you can do is manage risk. An even
so-called "risk free" investment such as a bank savings account runs the risk of the
cost of living growing faster than the purchasing power of the account. Therefore
good stock trading strategies should always include defined risk management
strategies.
More specifically, stock traders can manage risk in five ways:
1. Assuming risk - A trader assumes risk by entering a stock position or by not
entering a stock position. The second scenario is assuming the risk of "lost
opportunity".
2. Avoiding risk - A trader avoids risk by not entering the market at in-opportune
times.
3. Transferring risk - A trader transfers the risk to others when he exits a stock trade.
4. Reducing risk - A trader reduces the size of his stock position or uses stop-loss
orders or options to reduce risk.
5. Distributing risk - A trader distributes risk by trading various types of different
companies, sectors, countries etc. vs. trading only one stock.
By understanding the risks involved and how they should be managed, you will not
only be able to build a stock trading business that fits your tolerance for risk but also
one that is profitable.

Kevin Brown is an independent trader, author, and trading coach. His new book, The
Definitive Guide to Swing Trading is available at . Kevin can be reached at
inquiries[at]swingtraderguide.com and is available to speak at trading related events
or for media commentary and interviews regarding his market insights and innovative
trading strategies.

				
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