Hey guys,
an important skill in the context of trading is “Risk management”. I was wondering what techniques you guys use?
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The ‘skill’ is learning how not to lose money. Which means no overtrading, revenge trading, and gambling. Without an account you cannot trade. .
I will risk c.1% per trade, and limit open trades to 5%.
I think your question is too general, do not open trades that might ruin your balance completely, try to be disciplined, and try to control your emotions such as fear and greed and things like that!
As I learned, these are not practical, so try to apply them or you’ll have big problems!
Risk management is extremely important when you start trading and have not yet mastered a consistently profitable strategy - AND you probably have a small account.
Firstly see @steve369’s post above. Never trade without a stop-loss.
Risk management rarely makes a poor strategy profitable. The risk management tactics you use must be integrated into your strategy, otherwise there is a real risk of undermining your own strategy and making a winner into a loser. What seem like simple isolated decisions - e.g. should I use a 100 pip stop-loss distance or use support/resistance levels or just close the trade after 8 hours? etc. - actually interact with everything else you’re doing. Demo and test and practice, and then do it some more.
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That is really important.
I started doing that by making realistic stop losses, I knew that they were important but I could not apply it well! I just randomly set a stop loss which was not really helpful.
Also, I did not know a lot about setting goals, for example 3 trades per day and once I set realistic goals they helped me more to manage my trades!
i wouldn’t recommend that one, really
why shouldn’t the very best trade of the day be the fourth one (or the fifth one, or the sixth one, etc.)? you’d miss it, that way
suppose the day’s first three opportunities are just “so-so” and the next one is brilliant?
i prefer to exert my proven, statistical edge as often as it arises (when i’m available and can identify it, anyway)
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That can be true but as I mentioned earlier It was just an example and for a person who is not a full-time trader and wants to spend only some time at the desk, I think it can be a helpful technique.
Or even setting percentages, like 20%!
I think they can be realistic ones!
Yes, that is something which can prevent making profits but actually totally I suggest it to newbies or people who have problems with managing their risks, over trading and etc.
there are dozens of trading risk management strategies, but an important thing i use myself is that i set tp and sl at the first place.
different things suit different people, lol
i always set a stop-loss (of course!) but almost all my trading is trend-following so i very rarely set a take-profit target but wait and see what the market will give me, trailing my stop manually as the trade progresses (if it goes the right way!) just behind the most recently-formed swings-high/low
but occasionally i’ll set a take-profit for a proportion of the position-size (not all of it) if recent price-movements have strongly suggested a target
Yeah I read a lot about these things on BP but I though maybe there’s a more complicated technique for managing risks.
Thank you so much for all of the explanations. I should do more research about it then.