Learn risk management techniques that will greatly enhance your trading success.

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One of the most important and yet most commonly overlooked topics in investing is risk management. Many people buy stocks without having any idea of when to sell. The most common mistakes that beginning investors make result from emotional reactions to price movements.

Before you enter a position in a stock, you should also determine two exit prices - one for if you are right about the stock and one for if you are wrong. A target price should be set so that you know when you need to re-evaluate the stock and possibly lock in profits. A stop loss price should be set so that if the trade moves against you, you minimize your losses.

My people make the unfortunate mistake of letting their emotions interfere with their best judgment. They sell their winners too soon and let their losers keep dropping in hopes that they will go back up. Not using risk management techniques can lead to catastrophic losses, as many have experienced in the recent bear market.

Below are some risk management techniques and systems that are useful:

Trailing Stop Loss - This simple method used by top traders will protect your winning trades and cut your losers short.

Dynamic Stop Loss - The dynamic stop loss is a concept that should only be attempted by advanced traders.

Profit Protection - This method is designed to make sure that profitable trades remain profitable.

Hedging - Hedging means taking a position in a stock or option and then taking a contradictory position to offset the risk. Learn how hedging can protect your portfolio.

Short / Long Balancing - Protect your portfolio from unexpected market movement by holding both long and short positions.

Options - If used correctly, options can greatly reduce investing risk. Learn some of the common mistakes that causes people to lose money and some advice on the proper use of options.

Volatility - Why are lower priced stocks riskier than higher priced stocks? Read this section to see some important precautions to take when investing in more volatile issues.

Investing with IRAs - Learn tips that savvy investors like to use to invest safely in their retirement accounts.