Strongly agree, risk management is necessary, without which even the best trading strategy can fail. In fact, if a professional trader is asked to trade without managing his risks, there are high chances that he would incur a substantial loss. Trade risk management is an essential part of trading. One needs to protect their trading capital before trying to seek profit.
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Please how do I set stop loss?
Ask your broker or try on a demo.
Risk management is the most crucial aspect of trading. You should try to be at 3% of the risk and so take profit and stop loss would work well for you.
Every trader should know about risk management first. If you can’t manage risk, you can never be a profitable trader.
Learning risk Management is very important to lower the risks. Without risk management, you will not be able to fulfil the targets and will always end up gaining loss and lack of money.
True buddy. Managing risk is one of the most underestimated things, but we have to determine how much risk we can undertake for any trade, and hence for that we must set how our risk to reward ratio in advance.
Well I suppose 3% could be a bit risky for new traders isn’t it? I feel they should never risk more than 1% or maximum 2%, of the account on a trade, but not more than this. I say this for situations where you lose the trade, you’ll not end up losing more than 1%, which I think is manageable.
Well said and explained
The basic rule is to use the chart to establish where is a price level from which you would expect that price will move more probably against you than for you.
A simple example from the daily charts would be, if you want to buy in an uptrend, wait for a day with a lower high and set a buy order just above that lower high. Set your stop-loss just below the low of that day’s range. If price goes up through the high tomorrow your order will be triggered and that’s great, but if it then reverses and drops out through the low of the same day, that is incredibly bearish and price will probably go on to fall even further, so it would be better to be stopped out for a loss than to watch that loss getting bigger and bigger.
This is simplistic, but a good starting point I hope.
I’ve heard from many traders that 1% should be the mark. But what confuses me the most is how to effectively set the stop-loss points. There have been instances where I sold the stock ahead of the take-profit price hit the market.
I completely understand how frustrating that would have been. So the best way to set a stop-loss point would be to calculate and track down the moving averages. Some of the key averages would be 5-, 9-, 20-, 100-, and 200-. What you can do is to apply them to your stock chart and determine whether the stock market has responded to these in the past on support or resistance trend lines. Many brokers like Xm, Fxview and Bdswiss help you by trading position sizes that suit your capital size. I use them for forex trading and made some fine returns using them.
Looks solid. Key is sticking to that sort of discipline