Today I'm going to be giving you three steps that will all but completely kill your risk when trading in the stock market. These steps integrated over the long run will greatly minimize your risk of losing money using a basic understanding of statistics and forethought. As always, the only thing that I ask for in return for this video and these great steps is that you hit that ravishing like button. and boy it is ravishing.

And also if you see value in this video, subscribe for more short, sweet and simplified videos on how to trade the stock market. Step one is identify your upward versus downward potential with wage. We see upward long term potential from 3314 all the way to 80 and 50 cents or so, which is roughly like 53 cents of upward potential. In comparison, we see downward potential of only like $8 so we have 53 dollars worth of upward potential to $8 of downward potential.

That means that in the long run, if we focus on trades that have majority upward potential vs. downward potential, we'll come out ahead by identifying this and then executing into a position when we see early warning signs of a reversal. Now to be clear, having more upward potential than downward potential does not mean that the stock can't go down. it just means that if you train to set up a hundred times, odds are very strong that most of the time you will come out ahead.

When we talk about minimizing risk, it's it. Doesn't matter if you win really big on this one or you lose big on the other one. it's about how can you grow your account over the massive amount of trades that you do in a single month or in a single year? So let me give you an analogy: say you have a 25 percent chance of getting Mad Cow Disease every time you kiss your girlfriend or significant other of any sort. Now, this also means that you have a 75 percent chance of not getting Mad Cow Disease every time you kiss this person.

So if you kiss her once, odds are three and four that you didn't get Mad Cow Disease afterwards, so you'd probably get away with it the first time. you might get away with it for a while. But once you kiss her, enough odds are strong that you'll get infected with the disease. So with this in mind, it makes sense to keep a shot of Mad Cow Disease antidote in your pocket so that if you do contract the disease, you can quickly shoot yourself up with it and get rid of it before it causes any damage.

Now in this analogy, the price action is the girlfriend. Any chance of getting Mad Cow Disease is the downward potential. So if you trade stocks with more upward potential than downward potential, you will lower your risk of getting Mad Cow Disease aka losing money the majority of the time. Now, the trick is that the minority of times that you do contract Mad Cow disease or a falling price, you're going to want to shoot yourself with an antidote by limiting your losses utilizing the warning signs that we talked about of a downtrend.

Now, this could mean decreasing real estate towards and then below the SMA line as well as decreasing momentum. but I have a complete video on that and I don't want to go too much into these signs of a reversal on this video, but I'll link to that in the description below. Now going back to my analogy. You're going to want to get the other party's permission before attacking them with your face.

The way that price action gives you this permission to take advantage of its upward versus downward potential is by showing you signs of an upward reversal. If you decide to attack a piece of price action with a lot of upward potential versus downward potential, but it doesn't have any signs of a reversal, you're not going to have a good time because of the fact that there's no sign that it's gonna go up. And just because it has a lot of upward potential doesn't mean that it's going to move in that direction. Rather, upward and downward potential is something that you need to assess after seeing those original signs of a reversal.

Let me sum up what we just talked about. We should focus on stocks that have a lot of upward potential relative to downward potential and then only execute on them specifically when they display clear warning signs of an uptrend. If we do this repeatedly, then over the long run, we'll come out ahead. Step Two: Step two is you absolutely must have a concrete system of plans in place every time that you take a position.

I Say plans and not plan because you need a plan A and a plan B Just in case your plan A gets railroaded. Odds are strong that you've heard this advice before, but I know for a fact that most people like to take a position and then close their eyes and spin around. They watch the stock price and sit paralyzed until they feel like selling news. flash.

The stock market does not care about your feelings, but luckily, setting a plan is very easy and very simple. Step One: Entry point: Figure out what needs to happen in order for you to be convinced to take a position. Step Two: Exit point: Figure out where you're going to exit the position. So step two has two parts to it.

So Part A In the situation where the stock does what you want, get out when you see signs of a downward reversal. Part B If the stock doesn't do what you want, get out when you see signs of a downward reversal. Now, if you notice both Part A and Part B are both very similar that isn't a typo, you should get out when you see signs of a downward reversal that extends more than your risk tolerance. Well, if you have 50% of upward potential, but you see signs of a prolonged downtrend as well as actual downward price action that you might want to sell out of your position depending on your level of risk tolerance.

This goes along with setting a stop loss to the point where you automatically sell out of your position if the price suddenly drops. Now, you don't have to use a stop loss, you can use a mental stop-loss but you need to keep to whatever plan you set going in. Now, the key here is not to be too sensitive to price drops though, because there's almost never going to be a consistent uptrend. So movements of less than 5 to 10% or where you want you to set your risk oratory, you want to set your risk tolerance that if you do, you're obviously going to miss a lot of trades.

Step 3 is arguably the most important part of trading, so every second that you spend reading, watching, and practicing stock trading is akin to sharpening your Stora to go out to battle more. Over that time you spend is also learning how to defend against the enemy. and every hour you spend allows you to better fortify your shield to minimize your risk. So my advice to fortify your shield is quite simple.

Step one: Learn new material. Step two: Practice the new material and step three repeat. So the realistic way to accomplish this is by watching or reading instructional content and then going forth and practicing it. Now, of course, you can practice risk free with things like paper trading, but the non trash way.

The smartest way to practice trading is by using a function such as the on demand function on Thinkorswim. also call this rewind trading before, but it basically allows you to rewind to any time period and trade off of real price action that that happened at any time that you set it to. It's sort of like the back to the future version of thinkorswim without the unhinged professor, but the key here is that you could speed it up and go back and forth to see how your strategies would fare a lot quicker than if it was just a paper. Also, with paper trading, you can only trade when the market is open and since the best price action is the early morning, that really only offers you so much time every single day to trade.

Be clear, the paper trading and on-demand trading or both offered for free on Thinkorswim and both of them use fake money, so this is the ideal situation to practice trading. Also, I should note that I'm not affiliated with fingers from whatsoever and these options are completely free. The only thing that they do ask you for is like a social security number and also it's only available in the United States as far as I know, which is unfortunate, but there's also a lot of other platforms that I think offer this as well and you can check that out based on the country that you're in. But for those Americans if traders think this one is the best option by far.

Also, in terms of learning, I have a playlist with pretty much every important indicator you need in order to start practicing. There's also annals of other content on YouTube and the Internet that you can use now I Hate to leave you with a stupid quote, but the idea that the more you learn, the more you earn is completely true with the stock market. But to add something to it, the more you practice, the less surprised and helpless you will be when the price action inevitably turns on you during your intraday trading sessions personally. I Have a very hard head when it comes to learning, so one of the best ways for me to get in material was literally just to watch the simplest video that I could find rewatch at ten times that I needed to and then practice it a million times until I got it right.

So now I guarantee you that most people watching this video can learn a lot faster than I did. So I highly recommend you know, watching a video, writing down some things that you want to practice and then go in on thinkorswim or whatever platform that you're using and practicing it a million times until you know exactly what you're doing? Anyways, folks I Hope this video was helpful if you have any questions whatsoever. We have the Zip Trader Circle Facebook group. It's a great place to meet other zip traders as well as kind of connect with all the different dots within the market.

Um. also I post nightly a watch list so if you're having a hard time finding stocks and I post every single night's anyways, have a good day folks and I'll see you in the next video.