Risk Management In Trading | And Risk Management Plan |
Risk Management
Dear trader and investor, risk management is an important element in your trading journey. Risk management protects your positions and your capital from unpredictable moves or large moves opposite your trades. Often new traders and investors ignore risk management. If you do not manage your risk management properly you end up blowing up your trading account and you lose all your money.
What is Risk Management
Risk management is the holy grail for traders and investors. Risk management helps you to protect your capitan from unpredictable market moves and big losses. Always cut your losses quickly. Never take more than 1% risk of your capital in one single trade.
Key points:
Position Sizing: Risk only a small percent of your total capital on each trade 1-2% is a good risk. This way you're protected even if one trade doesn’t go your way.
Stop Loss: Always set a stop loss when you take trades, don't lose all your capital in one or two trades . Set a stop loss order to limit your losses and protect your position from big losses.
Diversify Your Trading: Don’t put all your capital in one trade. Spread your money across different assets and opportunities to balance out potential losses.
Risk-Reward Ratio: Risk reward ratio is a very important element in your trading journey don't ignore it. All new traders and investors ignore the risk reward ratio. It is very important before entering a trade, calculate your risk reward, how much capital you lose when you're wrong versus how much capital you gain when you're right.
Risk Management Strategies
There is no way to trade without risk in trading. But you can manage your risk to avoid big losses. Every successful trader and investor lose money and still ends up making money because they focus on their risk management and risk reward ratio.
For Example:
If your capital is 100$ and your daily risk limit is 1% of your total capital and you took a trade your risk-reward ratio is 1:3 when you lose you lose 1$ and when you gain you gain 3$. Now dear traders and investors if your (10) trades hit (SL) stop losses you lose 10$ And if your (5) trades hit (TP) take profit you make 15$. After losing 10 trades you are still in profits. You just need to follow your risk management and your risk reward ratio. That is why successful traders and investors end up losing and they are still in profits.
Advices:
No:1 Always stick to your plan.
No:2 Be Patience,Patience ,Patience.
No:3 Focus On your risk management and risk reward ratio.
No:4 Don't be greedy.
No:5 Do not change your trading strategy all the time.
Conclusion:
By implementing and following your risk management and your risk reward ratio in your trading journey this will help you to get success in trading business.Risk management protects your positions and your money from unpredictable moves or large moves opposite your trades. Always use stop loss and risk reward ratio. You don't need 100% or 200% return on your capital per month, you need only 30% to 50% per month. If you get this you're in top 5% traders.
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