I too believe that risk management is the answer but to only one question that is how to avoid big losses. Risk management is not going to make profits for you. It is your strategies that are going to make you money.
That mode of thinking is like saying "this company's quality inspectors need to do their jobs" when the root cause of inferior products starts way earlier in the process than at the end when you abort........
Risk management and money management tell you how much to risk and how to handle a loss. But to keep moving, that is not enough. You will have to keep updating your processor with what is going on in the market so that your strategies can be updated accordingly.
There was some discussion back and fourth early on in the thread disputing the importance of Entry vs risk management. Everyone believes in different things. Is it possible that the OPs way of thinking is different, in that the Risk Management IS part of the entry? I.e., maybe he's not just placing trades, thinking of each one as an individual trade, whereby the RISK is based on that ONE ENTRY... but instead... Placing ENTRIEs, based on that RISK, likely using the simplest of chart analysis. I would imagine the simpler the better. Figuring it this way, maybe the ENTRY is less important, and with this paradigm of thinking, the EXITs actually becomes really important? Just spitballin.
Definitely! Many new traders fail because they don’t have a good risk management strategy. It is essential to have one to avoid losses. With good risk management and a trading strategy, forex trading becomes much easier.
If you do not fear the market and what it will do to your account and any possessions pledged as collateral to your losses, it is only a matter of time until you average down to zero. Believe me, trading while cutting losses is much harder than just buying and buying and buying as price moves against your position. Co worker of mine has been averaging down UPST for months. He can't see beyond its great earnings and sales, valuation and other metrics of myopic muppetry, yet the pain is getting too real to ignore. He's not sure what to do. I told him to cut losses after that gap down on stellar earnings three months ago. I told him to get to the chopper, because it was an obvious ambush! Trading is combat. Never forget this.
Risk/trade mgmt is also about exploiting winning trades & leaning into the not so common fat pitches with much more size. Think of it as loss/profit mgmt. It is creating the best chance for your math advantage (expectancy) over a larger # of trades to pay off. A trader with mediocre strategy and a great risk/trade mgmt model is likely to become fairly successful. A trader with a great strategy and a weak risk/trade mgmt model is likely to end up bankrupt. This link is loaded with a lot of wisdom about risk/trade mgmt. https://www.valuewalk.com/2018/02/difference-great-traders-good-traders-art-totis-porcis/
For a trader to be successful he should consider having a risk management strategy. For me, risk management is not only about setting a stop loss or risk to reward ratio but it is also about avoiding trade sets with a lower probability of winning.
Why is risk management so important in forex, and how can a beginner develop a good risk management strategy?