Basic Risk Management

My thoughts are that money management is just one part of your entire risk management plan.

Risk management is the most important topic in any business. Because the basis of any business is financial investment and we must do everything possible to save our money and create the conditions for it to become even more.

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risk management is really important for any kind of works , despite of having lots of money and plan , all approach can be useless if there is no RM.

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You summed it up really well.

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Money management is a part of trading. If you do not manage money, you will face a lot of losses. Money management is a part of the trading discipline. Successful traders follow money management all the time. Money management often converts bad trades into good trades. If you want to trade, you can earn a lot of money in one day, but if you do not follow the money management, this money can be spent in one day. So it is necessary to follow money management at all times in trading.

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Hi! I do agree with you. All points are valid. I also try to stick to the same, that helps a lot.

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That’s a very comprehensive outline of all to do with risk management. Thanks, it is very informative.

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Risk management is really important for trading. If you can’t control risk in trading, you will never be successful in trading. I made a lot of losses without risk control when I was in the new trade. But you can’t imagine that my trading results have changed since I started risk control. You will always manage 1: 2 risk rewards. And after analysis, use stop loss and profit level. Do not take more than a 2% risk on your original balance. And always manage the trade. This means that when you gain some pips, you will bring a stop loss to the entry-level.

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It sounds like an add for me

Indeed managing your money and risk both are important for trading. No kind of compromise can be done on these two aspects if one wants to be a profitable trader.

Very informative post. Sound and practical advice. Thanks.

Risk management is a very important aspect of trading and these pointers are really helpful for that.

I understand the concept of S/L and T/P but I am not sure how exactly to do this in a live trade. Does this only work for intraday and swing trading? Is it possible to set up a stop loss and take profit for a quick scalp?

Hi @ogm271

You can trade with SL and TP on any trade. You can not put SL or TP to near your current price a you have the spread.

See SL and TP price like you tell the broker when the price reaches this level close my trade.

Some brokers have SL hunting so you have to “learn” how your broker act.

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Of course. Never trade without a stop loss. EVER

Cheers

Blackduck

Great article my friend. You summed it up really well. Use the 4Ts model to decide how best to manage risk. This involves:

Transferring risk - assigning an individual, group or third party to be responsible for the risk
Tolerating risk - no action is taken to mitigate or reduce a risk (it still needs to be monitored)
Treating risk - controlling risk through actions that reduce the likelihood of the risk occurring or minimise its impact prior to its occurrence
Terminating risk - altering processes or practices to eliminate risk completely

Looking foraward to read more from you.

Well said, Focus on the risks that matter! Identify, exploit, and enhance opportunities.

Money management and risk management are very important in Forex. First understand the forex market, know about leverage, make a good trading plan, do set your risk - reward ratio, manage your emotions and practice on demo regularly.

Everything you said is true of course. I want to add that risk management an money management should be considered as the basis notions of trading activity, not even notions, but rules, you know. Of course trader must be flexible and master not only these two practices, but also emotions control and other things. Risk management accroding to various experience contains only one fundamental thing. It sounds like open a position with no more than 2-4% of deposit and wisely manage stop-loss and take profit. It’s also very significant for every trader who want to reach success in this activity I guess.

Sure having a trading plan is important, and that needs to be coupled up with a risk management strategy. Keeping a journal is also important as you can keep track of your past trades and learn from them.