First of all, if you are a Stud player or European Emperor, this article is not valid for you, because you are the chosen one, a warrior who works miracles with great strength, and a passionate warrior. Risk management does not belong to you, but long-term traders need to have the ability to manage funds.
Why Uncle Ai wrote this article is also based on the recent discovery that many group members rely on their passion to place orders in the direction I think, rolling positions at high positions and mercilessly cutting at low positions.
1. What is a risk plan?
Before trading, first check how much capital you have? How much risk are you willing to take on each trade? This needs to be planned in advance. The proportion of risk you take generally depends on your capital and your ability to make money off the market. For example, if your investment is 50,000, and your off-site income is 10,000 per month, then the monthly risk plan is no more than 2,000, which accounts for less than 20% of the off-site income and 4% of the total funds. This can ensure that if you are particularly unlucky and make consecutive wrong orders, the loss in your account will not affect the follow-up. For professional traders, the risk of each transaction should be controlled within 2%, and the trading loss for the month should not exceed 10%. If it exceeds, force yourself to take a rest and think carefully about the operations of the month.
Uncle Ai also believes that there is a psychological risk plan. Trading is a mechanical behavior, and human beings are perceptual animals. So I think the risk plan with psychological tolerance is the most important. There is 5W in the market and stop loss. If 2000 is not something you can accept, you have to make a plan that suits your psychological tolerance.
2. Profit-loss ratio
Trading is neither a prediction nor a passionate goal. It is a probability of a profit-loss ratio. For each transaction, there is a suitable plan for entry and exit, stop loss and profit, which is trading. Here's an example:
BTC yesterday I asked my friends to enter the market and do long. Based on the breakthrough of 25700, I entered the market with a stop loss of 25400 at the bottom and a take profit of 26400 at the top. The profit and loss ratio was 1:3. The second target to reduce the position here is around 28000. Here The profit-loss ratio is 1:5. Use the funds you can afford with a stop loss of 25,400 to make this plan.
3. Trend and take-profit target
Why are take profit targets and trends risk management?
Trading is not a sure-win signal. Strict implementation of the profit-taking plan is the core of your stable profits.
Trends always come from small levels. Some people will ask why Uncle Ai, your orders are so profitable. Different cycles have different goals. The orders that go out of the big trend in small cycles are to gradually reduce positions and let profits fly. I will definitely take them. live.
The target of taking profit, 1:2 or 1:3, are all position reduction positions. When the target position cannot be seen, reduce the position according to the proportion, which is nothing more than making less money. After all, everyone’s perception of the market is different.
4. Subtraction of transactions
When a certain profit is achieved in the market, it is never wrong to withdraw the principal appropriately. There are many opportunities in the market, and only when you are alive can you have the hope of getting rich.
Uncle Ai devoted himself to sharing his trading experience, which is not included in this risk management book. I hope it can be helpful to fellow traders.