You will understand better when the right time to buy and sell gold bullion is if you have examined past rises and falls, trends and major events in the gold trade.

If you want to be serious about gold trading, then learning about the gold price history is not something that you are going to want to just skip over.

Even if you are only interested in taking the time to look a few years back at the history of gold prices you are still going to benefit, and there are even some great classes and courses that you can take if you want to learn more about the history of gold and gold prices. This is a great idea if you have a bit of time to spare or consider gold trading to be a major part of your life.

When you get into the history of the commodity you will find it very interesting and it will influence the way you deal with gold when it comes to buying and selling. You are going to better understand how the whole market works and about what sort of things you should be looking for, what you can notice that is going to tell you that there will be a change in value of gold.

You can learn so much more if you really look into gold trading and investment. Look on the internet, read book and talk to industry insiders whenever and however you can. When it comes to something like gold trading, you can really never learn too much.

If you do it right, trading in gold bullion can be a very profitable course of action. You will fail however if you ignore the past and fail to learn about gold as an investment commodity.

Richard Thaler and Cass Sunstein in his book entitled “Nudge: Improving decisions about health, wealth and happiness, we describe some of the emotions that investments tend to get in our way and how we can deal with them. When the market trend from lower left to upper right, you can easily get lost in some of this emotional investment.

Following the herd. It’s easy to go along with the crowd. If it is safe for them, it must be safe for me. Nevertheless, we must pay attention to those signals, which we have little to get something can not be right. This is especially true if our investment process tells us to take precautions. If our analysis tells us to be cautious, despite the fact that the crowd says, to take steps to protect your profits.

If your stocks are those that are discussed at all cocktails, you know, you become part of the herd. This does not mean that you should close these positions; it means you should rethink why you own them, should you keep them, and what is your exit strategy.

False sense of security. When things go well, investors might be lulled into a false sense of security. Markets will continue to grow our portfolios grow with him. We could even take on more risky investments, buying a hot stock market in an attempt to increase our revenues. When profits come Easy, investors tend to think that they know everything, and lose their sense of anxiety. When this happens, it indicates that you are vulnerable to large losses on the market should turn against us.

Whenever you feel this investment behavior, to reconsider their positions on the basis of what you are looking at what is going right and what can go wrong. Be prepared to take action if the positive trends turn against you. Always think that could change the current sound momentum. Few opposite perspective do not hurt.

Reduce risk. The best professional investors are always to focus first on the risk that they acquire. Furthermore, they articulate what they will do to manage this risk. Then they examine the potential return. When things go well, there is a tendency to ignore the risk you incur. After a good long-term action, the risk of reversal increases. If you are unable to formulate an increased risk you assume, it is a sign that you can avoid the growing dangers of your position.

To manage this investment behavior does not cease to do homework. Especially continue to assess the risks of their positions as they grow in value. Always use a strategy to reduce risks, which include selling part of your position after Nice ran. Be assured, your trailing stop where it should be. Consider using covered calls and protective puts when the parameters of risk may be higher. No one went broke selling positions that were profitable.

Forgetting to diversify properly. When we make money on the market and our portfolio grows in value, we strive to congratulate ourselves on the fact that we have a large investor. During our portfolio can become too concentrated in one asset without us even realizing it. This might work, if this asset class is one of the leaders in the market. In the end, the time will come when money will be transferred to other assets, leaving behind you. Worse yet, your portfolio may decline in a hurry.

To manage the investment of emotion, at least quarterly, preferably monthly, to assess how you have become too concentrated in one asset. If it looks like some shares increased significantly, it might be time to take a little bit on the table. Consider the sale of half of each winning position and put money to work in another and the surrounding areas. The other half of your best stock can save Running with Trailing Stop to protect your growing profits. Only now, you’re playing for money at home.

Investing emotion is one of behavior we can control, adhering to its rules. When our emotions get in the way of investment, we tend to make mistakes that will cost us. When things go well, is easy to forget to follow appropriate rules of investing. Take steps to recognize the symptoms, and then return to a proven investment process. Your portfolio will thank you.
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Risk Management is an activity we all engage in; from wearing our seatbelt to homeowners insurance, we’re trying to control some form of risk. But what about the risks associated with trading and investing? In this article we’re going to discuss a few key Risk Management techniques.

As mentioned above, Risk Management is an activity or activities we use to reduce or control some form of risk. In investing or trading, the simplest definition of risk is “losing money”. So what can we do to reduce our risk? There are many articles, studies, books, etc, covering nearly every aspect of Risk Management, but let’s limit our scope to traders.

- Never trade with money you need. “Money you need”? Is there such a thing as money we don’t need? Actually, yes… money you need includes money used to pay for essentials (food, clothing, and shelter), to pay bills, buy gas, money to save for emergencies and retirement, whatever you “need” to survive and thrive. Everything else is money you don’t “need”, usually described as “discretionary” or “disposable”. The risk we’re mitigating is not losing the money we “need” for more important purposes.

- Never risk all of your money on one position. As the old proverb states; “never place all of your eggs in one basket”, some very sage advice for a saying that has been around forever. The risk here is pretty simple… if you risk it all and lose; you’re out of the game. Even if you win… and win big… the next time you bet it all and lose, you’re out of the game. As a trader you will at some point hear the saying; “the longer you stay in the game, the better your chances of winning”, again, some very sage advice.

- Keep your position sizes reasonably equal. Doing this ensures that one position in your portfolio doesn’t overpower any other. If you have $100.00 and place 4 bets of $25.00 each, and one of those bets loses 25%, your portfolio will be down a total of only about 6%. If, on the other hand, you have $100.00 and place 3 bets of $20.00 and one bet of $40.00, and the $40.00 bet loses 25%, your portfolio will be down 10%… nearly double the total loss to your account!

- Diversify your positions. As with all investing and trading, diversification is a must. Much like the previous two bullets, diversifying protects us from catastrophic loss of our capital if, for example, some company were to go bankrupt. This subject is so crucial to our financial well-being, I plan on publishing a complete article on this subject in the near future.

- Account Allocation. Account allocation means how to allocate the funds in your portfolio, such as how much to allocate for trading and investing, how much to keep in reserve, how many positions to have open, etc. I’ll try to touch on each of these topics below;

– Allocation. Much like keeping some extra cash for emergencies in a savings account, or not running a checking account balance down to zero, it’s generally a good idea to not invest 100% of your trading funds. These extra funds could allow for unforeseen fees or commissions charged by a broker, minimum account limits, and such.

– Reserve. Reserve is the amount of trading funds kept aside for future investing use. These reserve funds are meant for new trade opportunities that may arise, and can also help fund new trades after taking a loss on a previous position.

– Number of Positions. There are two main ideas here; number of positions, and maximum number of positions.

— The number of positions open at any one time is a great way of controlling risk. As market conditions provide higher probabilities of success, more trades could be opened, if market conditions change, fewer open positions reduce your funds at risk.

— Knowing the maximum number of trades you may have open at any one time allows you to properly allocate your trading funds using the above activities. If you don’t know the maximum number of trades you will have open, it will be difficult to determine how much to allocate per trade, how much to keep in reserve, or even how much of your account is at risk at any one time.

- Fixed Fractional Allocation. Although I gave this item a bullet of its own, it’s really another method of Account Allocation. In this approach, a specific percentage of your trading capital is allocated to every new trade… say 25%. Using this approach, position allocations grow as your trading funds increase (after winning trades), and position allocations shrink as your trading funds decrease (after losing trades), all while keeping your position allocation at 25% of your trading funds. The intent of this approach is to play more dollars on the way up, yet keep investors/traders “in the game” longer by decreasing risk during losing streaks.

While we’ve covered a lot of information in this article, there is always more to learn about Risk Management; your job is to continue learning, continue earning, and try to apply some of the above concepts in your trading.

Discuss this article and other trading topics at Profit Buddies

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