Stock Risk Management: How To Hold Onto Your Trading Capital

While single stock risk management is an interesting concept, its still key that whether you hold 1 stock or 100, you need to assess risk.

Accurate assessment of potential loss due to volatility could require a lot of number crunching, but simple methods exist as well. The ATR, or Average True Range, for the historical annual price ranges provides a rough estimate. Most of the free web based price charting services provide this one of many available volatility indicators.

Risk of Corporate Bankruptcy

Stocks from Enron or WorldCom had performed well in the bull market of the 90’s, and their demise never appeared obvious until the selling began. This risk always exists in long term long side stock investments, and it increases with length of holding period.