Three Ways to Take Risk Out of the Stock Market

Using these three simple steps, you can reduce the risk in your stock picking plan:

1. Screen Your Picks. This might seem obvious, but patterns that look like they are developing into predictable trends do not always follow through. 

2. Get In. Get Out. Set realistic target exit prices for all stocks. Lock in high returns while the stock is high, and  get out before the market has a chance to change its mind. With Swing trades, this means taking profits from one part of the trend. As soon as the first pullback occurs, we get out and wait for a reentry point.

3. Set Tight Stop Losses. This step is absolutely critical to minimizing your risk in the stock market. If a sure-fire winner turns out to be a fizzled-out dud, your system needs to have a built-in, abandon-ship trigger. That is, you need to know when to cut your losses and move on to brighter prospects.

A stop-loss trigger around 3% is realistic for all but the most volatile stocks. So if a trade starts to go sour, you will almost never lose more than 3% of your investment.

These tips came from ChartAdvisor.com and were modified to suit the NeuroTrade trading strategy.