Risk management is the heart of trading that every trader should follow to make profit on average. Risk management and money management should be the part of one’s trading as it helps in bringing out profits on an average. For example, avoiding trading during high market volatility is a part of risk management policy.
managing risk is a great skill and to be experienced about this approach is a long time issue , so we need to take patience first of all.
what you think there is any difference between money and risk management ?
its all about to avoid unfortunate risk and losses. i hope you got the message
Yes there are differences although they are also closely related.
For example, you may have two forex positions open with an acceptable combined monetary loss potential of XX dollars but the risk potential is very different depending on whether these are correlated pairs or not.
Risk management factors can include issues such as whether to keep positions open over a weekend even though the target and stop levels remain unchanged.
Moeny management factors can include issues such as first determining the suitable risk level on the chart in pips and then adjusting the position size so that the monetary equivalent of those pips meets your criteria.
All important issues in achieving sustained stability and success in one’s trading.
thanks for your nice with good information , got some fine lines. thanks
The risk management solution is counter intuitive
to be experienced about risk management is a long time issue , need a long time with a great level of patience.
Why would it be so difficult?
I would suggest that risk awareness and its measurement and management are issues that traders should be taking into account right from the start. It would be very unhealthy to be placing trades without knowing what amount of equity is at risk both with each trade individually and with all trades in total.
The most important thing to do as a trader is not to do anything that is beyond your understanding. It’s true that you will have to take risks every time you are in the market. But it doesn’t mean that every situation is worth trading. You need to learn to differentiate profit-making situations from the rest.
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By now, you would have become well-versed with the fact that losing is a part of the game. While you cannot control how the market moves, you can control how much you wish to put at risk per trade. This will help you keep better control over your profits and losses.
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there is no one who can control losses , this will happen must , you just have to take losses easily.
Everyone can, and should, control their losses.
You cannot know beforehand which trades are going to lose but you can definitely define your position size and your stoploss size and thereby control the amount lost and keep it within your strategy parameters.
It is the same principle in any other business where “losses” are “business costs”. Provided the costs of running a business are maintained below the level of gross profits then there is a positive net return.
We are no different. To succeed in trading one has to manage both gains and losses such that, over time, the gains exceed the losses. That is it. That is all. The challenge lies in building a strategy that offers an edge in probability, and combining that with target/stoploss parameters that ensure we keep more than we lose. Beyond that it is purely optimising the rules to obtain the best overall gains.
Trading without risk management is a casino!
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With just risk management it can be possibe to be profitable. Your equity curve will look different than a high level profitable trader. Still the most important thing in this business is to make money.
It makes me so sad every time to hear about risk management policy. And it mostly ends up that many traders are just afraid to start trading.
My friends, learn to work with your money - average, lock, break lots, split, hedge, make profit slices… The main thing - stop being afraid and take risks. The strategy is irrelevant. Manage your money, not look for the “right” entry points. Any entry point, in any direction, with the right management of free funds, will bring you profit and will be “correct”. For training purposes $100 on a cent account and 1:500 (1:1000) leverage, 0.1 lot is enough. Approach Forex trading as a game of chess (not roulette), develop your own money management tactics (not to be confused with strategies!!!) and use it. Forex is not a casino, Forex is chess.
It’s just a word of mouth.
It is difficult in practice.
Many people try to use it - then they lose control - then they are not ready to increase their capital and become frustrated with everything.
This is the wrong approach in my view. This is business. In business you have to be prepared for everything.
yes it is. i think practice is everything in trading life as well real life.
Risk management is a defensive strategy that is very essential for cutting down the losses. Forex trading is a risky business which makes it mandatory to use risk management even when the trader is very sure about his trades.
Depends what high market volatility means. This morning there was a news dump of German sales being significantly worse YoY than expected. Result was lots of volatility downwards on the DAX. That’s a move you want to be in on. You just need to make sure you are ready to get out if it looks like a fake move