Risk Management is the answer

Risking your money without knowing how you would fill the gap if you lose it is utter nonsense. When executing a trade, plan A is what you will do with the profit you make, plan B should be what you would do if you make a loss.

 

Risk management is the first building block to obtaining a positive expectancy trading system. When you have trained yourself to cut losses at a certain point and just go ahead and do it without second guessing yourself, it then becomes possible to track win rate and R multiple.

You can also get honest with yourself about the "trend" or "drift", and if you're on the wrong side of it. So much easier to think when you have no commitments.

Remember UPST? I hope my former co-worker is not still holding it. Last I checked he bought it all the way down, but that was before the latest "surprise".....

Averaging down worked for him in a couple other bear markets, but soon he will need to take out his money for expenses. Then what?

 

well if you dont want to loose your hard earn money then risk management is always the answer.

 

yes it is. but to make a perfect risk management is not a minor deal , need a very long time of experience.

 

I agree, managing risk is one of the most important aspects to a trader’s success. Understanding the risk and preparing to trade accordingly with a thorough understanding is extremely important.

 

Indeed! Risk management is the key to becoming a successful trader. If you keep on running after the money, without protecting your capital, the market will eat you in an instant.

 

Is that not the same as developing a strategy full stop though?

 

A lot of people here will never make any money. They think they have found the solution, but are never open for any ideas that come from others. Tunnel vision or too big ego.

Risk management is the wholy grail.

 

Whatever you do, please refrain from disclosing your method. I've seen several working systems destroyed by being posted on this very site.

And to wax philosophical once again, the motion in the market that fuels your account trajectory is all the unstable orders placed by traders who are losing. Money flows from the many (losers) to the few who know their edge and keep it secret, or have inside information.

But the first step in keeping your money is to not lose it! This thread is for beginners.

 

I use extremely tight stops, .05 to .12 for stock daytrading.

"Good trades are right from the start ".... if they don't start to work out immediately, I tighten to a .05 type stop.