Online Stock Trading for Beginners: What is a Trade Plan? What is Risk Management?


what is a trade plan? How to manage risk as a day trader?this is Keisha here at trade with
resolve comm and this will be another trading essentials video lesson now if
you’re brand new to the stock market and you’re interested in learning the
terminology that comes along when trading in the stock market please
consider subscribing to the channel today’s topic is what exactly is a trade
plan so a trade plan is simply a blueprint or a guide that you will
follow to allow you to manage your trade properly and so a trade plan contains
three important elements one it contains an entry price to a stop-loss price and
3 a target exit price and you can determine these values by using a stock
chart or a candlestick chart and so the goal whenever you’re developing a trade
plan is to make sure that you are risking less than your potential reward
so let’s go over a quick example so let’s say that you decide to buy 100
shares of a stock at five dollars per share so that means you are going to
invest five hundred dollars into this trade you bought 100 shares for five
dollars per share that gives you a five hundred dollar cost so then you decide
that your stop-loss price is going to be at four dollars and seventy five cents
so that simply means you are risking 25 cents per share which means you have 100
shares so 25 cents multiplied by 100 that means that you are simply risking
twenty-five dollars on this particular trade so it doesn’t mean that you’re
risking five hundred dollars yes you invested five hundred dollars but it
doesn’t you’re risking $500 you’re not going to
risk losing the entire investment of $500 here you’re simply risking $25 so
now let’s say that your target exit price is at six dollars and fifty cents
so remember you bought in at five dollars with a target exit price of six
dollars and fifty cents so if the price of the stock reaches six dollars and
fifty cents you are going to make a profit of one dollar and fifty cents per
share so 150 per share multiplied by your 100 shares gives you a one hundred
and fifty dollar profit so in essence you are simply risking twenty-five
dollars with the potential of making one hundred and fifty dollars so is this a
trade that you would be comfortable with for me I’m willing to risk twenty-five
dollars to make one hundred and fifty dollars any day that is indeed a great
risk reward ratio and you’re risking twenty-five dollars to potentially make
one hundred and fifty dollars and again you can determine these values by using
a stock chart and so whenever you are considering entering into any trade the
key is just to make sure that you are risking less than your potential reward
and they all really boils down to risk management and learning how to follow
and trust your trade plan and so keep in mind there are ways to place the odds in
your favor whenever you are using a stock chart or technical analysis to
maybe play a certain pattern or a certain set up there are ways to place
the odds in your favor and manage risk appropriately so I hope you enjoyed this
short video lesson on what a trade plan is if you have any questions or comments
please leave them below and I look forward to seeing you in the next video
lesson you

6 thoughts on “Online Stock Trading for Beginners: What is a Trade Plan? What is Risk Management?

  1. Are you new to the stock market or interested in learning more about trading? Check out my FREE blog here: https://tradewithresolve.com/blog/

  2. I commented earlier on one of your other videos (I'm binge watching them….I love your teaching style!!!!) about if you could do a video on a trade plan….and then I found this one. Thank you so much for going slow when you explain things. I am BRAND NEW to the day trading world…and am trying to learn everything I can before I actually start trading with money. Other video instructors sometimes go way to fast or talk way over my head and it just leaves more holes in the knowledge I'm trying to learn….so I truly appreciate that you take your time and explain things in a clear way, sometimes repeating yourself a couple different times for the viewers benefit! I'm seriously considering the possibility of joining your gold membership with the hopes it goes into more details. Level 2 and Time and Sales moves so fast, and in the videos it's hard to see what you are actually doing in your live trade videos when you are buying and selling so quickly. I would love to see a video on level 2 and T/S where you pause the live action for each step that you are doing in placing a trade order so we can see everything that you are doing step by step! Ok….on to the next video!

Leave a Reply

Your email address will not be published. Required fields are marked *