How to stay in the game

When trading it’s natural to focus on profits and profits alone. But don’t be fooled when T.V. adverts tell you that that’s what the best traders do. They don’t! If you watch the financial news channels then you may hear talk of ‘love for the game.’ If you want to stay in the game, then preservation of capital becomes more important than accumulation. After all, if you manage risk effectively, you increase the scope of opportunity to make a profit. If you don’t, well, you only have one chance to lose everything. Get good at the game, and the money will follow.

We haven’t just written this special report because the markets are volatile. The concept of protecting your capital is every bit as important as growing it. This isn’t rocket science either – risk management needn’t involve any fancy financial engineering as we’ll see. Risk can be managed both before you even enter a trade and when you’re in the thick of it.

UK 100 vs. 5 sectors over 5 years

The above normalized chart shows the 5-yr performance of a few sectors compared to the UK 100 . Miners and oil & gas producers consistently underperformed the wider market, despite being some of the most heavily traded stocks! On the other hand, the less sexy telecoms, healthcare and consumer goods outperformed the UK 100 with consumer goods in particular continuing to strengthen through the second half of 2015 on a buoyant housing market and with defensives such as tobacco riding out market downturns impressively, even as the UK 100 declined.

A little research here can greatly reduce the risk of big losses before you’ve even entered a trade. We have this information at our fingertips and, as our client, so do you.