Category: Business

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Managing Risk Across a Stock Trading Portfolio

The importance of risk management and capital protection cannot be overstated when trading in the financial markets. Many online brokerages now offer conditional orders like stop losses to their clients and this has gone some way toward addressing the issue, but risk management goes a lot further than simply setting a stop loss.

When a trade is placed, there are a couple of different types of risk that need to be thought of and planned for.

Trade Risk — This is the risk that the individual share you have bought will plummet and your investment will be worth nothing. Some ideas for mitigating trade risk include setting a stop loss, using a capital allocation method and only risking a set percentage of your capital in any given trade.

Market Risk – this is the risk that the entire market will fall, and wipe out your entire portfolio.

Unfortunately, the only way to entirely mitigate market risk is to refrain from trading in the markets. The happy news is that even though we cannot totally get rid of market risk, we can go a long way toward making it manageable and we can keep it at a point where we feel safe in the market and can sleep soundly at night.

Many risks are involved in stock tradingPortfolio Heat – A Risk Management Tool for Traders and Investors

Portfolio Heat is a tool that ensures that only a set percentage of an investors capital is ever exposed to the market at any one point.

For example, Jane the Trader has an account worth $100 000 to trade with, and she never risks more than 1% (or $1000) of her account on any one trade. By risking only $1000 on each trade, Jane is protected from trade risk, but not from a broad market crash. If Jane had 20 new positions and the market crashed, she could lose 20% of her account in one fell swoop.

To protect her portfolio against an across the board fall, Jane could implement a Portfolio Heat strategy. To do this she must determine a few parameters.

Firstly, she must decide on a level of loss that she would psychologically feel comfortable handling in one day. This is usually a percentage of total equity or capital, for example, 6%. This means that in Jane’s case, the most she feels she could comfortably lose in a crash would be $6000.

($100 000*0.06).

This heat percentage will be different for everyone and should be set in line with each investors risk profile, but as a general guideline between 5 – 10% is usually acceptable.

Once a heat percentage has been decided upon, it will guide the trader or investor as to how many new positions may be opened at any one time. In Jane’s scenario, she could never have more than 6 new positions open at any one time. Because Jane risks $1000 on her trades, by limiting her new positions to just six she ensures she never has more than $6000 at risk in the market.

Protective Stop Loss

It must be noted that this does not mean she is limited to six positions in total. As soon as any position moves into profit and its protective stop loss is moved to breakeven, the position no longer has any capital at risk and therefore no heat allocation.

This also applies to trades that get stopped out at a loss. Once a traders’ capital is safe the position no longer counts toward the heat percentage and it means that a new position may be opened.

Using Portfolio Heat will allow traders and investors alike to rest easy at night, knowing the market only has access to a small percentage of their capital. Market crashes are rare but they can be permanently scarring to a traders psychology, and even if their account is relatively unscathed from the emotional impact of a substantial loss must be considered.


How Internet Fax Can Help Your Business

Internet fax offers the user a lot of great things to its users. Making use of online fax service could also help your business for less. It is especially helpful and ideal for people who are on the move and who’s business require them to be always on the go.

Easy Retrieval

Save yourseff from the hassles of the old fax machineOne of the perks of using this service is the easy retrieval of faxes. Users can read their faxes on the computer like that of an email message. Moreover, faxes can be sent and received immediately. Contrary to the traditional fax machine which could only handle a single fax at a time and could sometimes be disrupted by busy signals, the internet fax allows you to send as much as you need depending on your package or your monthly subscription. The monthly savings you get could be used for modern mode of marketing services like search engine optimization services or Google advertising. Even Jason Berkowitz SEO recommends you can use these saving for social media promotion through Twitter!

Since small businesses make use of fax transmission for their transactions, it is advisable to use the internet fax since they can’t afford to lose profit due to missed faxes. In addition to that, they could save more on just using a modern internet fax service than buying a fax machine. More data could be handled with internet fax, and this directly translates to higher profits.

Internet vs. Traditional Fax

Mobility is another important factor that sets the internet fax apart from the traditional fax machine. For a user to send or receive fax using a fax machine, he/she needs to stand in front of the machine and wait till the document is sent or for the document to come. This small thing could create some issues especially for businesses which send employees to various places or which require occasional work from home.

Using online fax service could improve the workflow in the same manner as the other notable latest technologies such as cloud computing. Small businesses could take advantage of this online fax service features very easily and instantly. It could often give their clients the impression that their business is already big enough because of the superior organization and mobility.

You can browse through some websites like these online fax services where you can see a lot of helpful notes about the free online fax services. You will also learn how to maximize the use, how to protect your email from the faxed scam, step by step guide to using it, and many others. Read on so you’ll know the pros and cons of using this system.