When To Buy and Sell Stocks: Buying Stocks for Beginners Video Lecture | Stock Trading: A Complete Guide (English) - Business Basics

what's up guys Alan here with eat sleep
trade net I wanted to go ahead and take
a second and make a lesson video for you
guys on striving to find that proper
entry and help you guys eliminate some
of the emotions that come along with
trading you know finding that proper
entry is a huge part of becoming a
successful trader proper entry allows
you to define your risk you know and
keep it at a minimal as well as allowing
your reward to be as large as possible
and you always want to have that risk
reward ratio in your favor to give you
the best possibility for success so sit
tight for just a second we'll be right
back and we'll get into finding the
proper entry
alright guys welcome back we're taking a
look at the chart here 4c o WN and this
here is a chart that we traded off of
our watch list and are still currently
have a long position in so we're going
to review this trade and why we entered
where we did and how you guys can find
the proper entry for yourselves so here
this yellow circle as well as the yellow
line is going to represent the day in
which we started our swing and the price
that we started our swing which was at
5:50 this green area up here is going to
be our target price or our reward you
know where we expected the price to
return to which in this case was around
595 a previous resistance area that I
thought the stock had a pretty good
opportunity to work its way back up to
since we are in this nice strong trend
and anticipating that that strong trend
would continue and our red circle here
as well as the red line will represent
our defined risk area or where we would
have placed our or where we placed our
stop which was right around 539 so every
chart has to be read differently there's
not a chart that or there's not just one
strategy that's going to work for every
chart but I try to base my entries off a
good risk to reward ratio and you want
to do at least a one to two I really
strive to find charts that are giving me
a 1 2 3 or higher so when I find a chart
that offers me that 1 2 3 risk reward
ratio I make sure that my stop can be
placed low enough that the stock has
room to move so I don't get stopped out
early but not risking more than 2
percent of my total capital so you can
see here this was in obvious low and it
gave us a very defined wrist risk to
that previous low if we broke below this
area
we would know that obviously the chart
is not going into the direction that we
wanted it to and my idea here was to
take advantage of this major sell-off or
large dip that we had during this
uptrend that pulled back to our 50-day
simple moving average alright so with
that being said starting our swing here
at 5:50 our stop placed at 539 gave us a
risk of 11 cents
okay so we're risking 11 cents per share
on this trade and if we hit our target
price up here at 595 we have a possible
reward of 45 cents okay so that's the
first thing that I look for a stock that
is presenting buying opportunity with a
well-established positive risk reward
ratio or in this case a 1 to 4 risk to
reward so once we find that positive
risk to reward we can then decide the
size of our position based off not
risking more than 2% of our total
capital okay so we never want to risk
more than 2% of that total capital while
having a positive risk reward ratio so
for example let's say that you are swing
trading with a $5,000 account so you
have a small account and you're very
limited on the trades that you can make
having a small account is all the more
reason to pay attention to your risk to
reward this allows you for example to
make this trade four times and you only
need to be right one of those times in
order to break even and you're not going
to be right in every trade so you really
need to have
higher reward force what you're risking
on each trade so a single winner can
make up and be profitable even if you
have one two or three losing trades
along with that winning trade alright so
back to figuring out our position size
so our example here we have a $5,000
account max and risking only 2% of your
$5,000 is going to allow you to risk up
to $100 per trade okay
so let's say on this this trade we're
thinking about doing a $500 $550 here so
right that will cost two thousand seven
hundred and fifty dollars for five
hundred shares and if we get stopped out
we are going to lose fifty five dollars
okay plus commissions so for fidelity
I'm paying eight dollars each way so
plus sixteen dollars in commissions okay
so that's going to equal seventy-one
dollars so there's our risk don't forget
to add in you know those Commission fees
they should be included in your risk and
our possible reward or outcome if we
were to hit our target price up here at
595 is going to give us two hundred and
twenty-five dollars in profit so you
guys can see that even if we lost this
type of a set up multiple times we only
need to win it once in order to be
profitable and that is really the key to
trading is keeping that positive risk to
reward ratio whenever you're entering a
keeping your risk below 2% of your total
capital while having that positive risk
reward ratio will give you the best
chances of becoming successful as a
trader
alright guys that's going to wrap it up
for this video if you have any questions
or suggestions please leave them in the
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thanks for watching and we'll see you in
the next video