Only 5% of traders rise and shine in
trading. What is there SECRET to make a profit in trading??
The answer is there is NO SECRET! Even the most experienced traders make losing trades, But the difference is that they manage the risk and reward aspect of their trades very well. This is where most traders fail. Managing the Risk that you bear in every trade and the reward you earn to bear that risk will decide if you will be profitable in trading or not.
You must have a tested and proven strategy that makes the most accurate indications/Signals first to step into the market to trade.
The next step is to design a Risk Management Strategy according to your trading style and preference. Risk Management is really important in day trading or investment in general, It will help you gain an edge and stop you from getting broke.
Here is a method to design your own Risk Management Strategy:
Always use Stop Loss and Take Profit
I can't express how important StopLoss and TakeProfit are!! They will help you suppress your emotions to some extent. Disciplinary use of both will benefit you in becoming profitable.
Follow a Risk reward ratio in each trade.
Risk Reward ratio is the ratio or the relation between your order take profit and stop loss. You must have a RRR above one i.e. You must gain more in a winning trade than you lose in a losing one. This will ensure that you have profit even if you are losing some trades.
Risk no more than 3% of your capital per trade
Trading is a tricky job you will not always sail smoothly, There are going to be rough times. Risking Tons of money in a single trade could be a huge blunder. It's highly suggested to anticipate streaks of losses down the line and risk capital accordingly so, You don't end up blowing your whole account.
You Cannot cover your losses or earn a fortune, trading in one day
Greed is one of the leading factors that leads you to loss. You must have experienced days when you lost money and lost more trying to recover it. This is a bad practice for your career. You must set rules to quit trading for the day in terms of Target Profit, Target loss, or Maximum stop losses hit. Depends on you but these rules are crucial to save your days and money.
DISCIPLINE
The Node that connects everything together is Discipline. It is crucial to follow all the strategies you prepared for yourself with discipline, And Only You can develop this within. I am sure you have heard this Thousand times and yet you hear it again, This is because without discipline profitable trading won't happen.
These were according to me the Best risk management tips for Readers. Leave comments if you have any questions or if you have any topic to share. Thank you
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