Examples of Risk Management - Know Your Risks (Part 1)
Main points
- Unfortunately, losses are an inherent part of trading.
- The key to avoiding trading risks is to minimize losses.
- Risk management in trading begins with formulating a trading strategy that takes into account profit and loss percentages and profit and loss averages.
- Follow a rational trading strategy and avoid emotional influence.
I've been thinking about what the first chapter of the introductory tutorial should be about. Generally speaking, learning risk control must be the first step to start "long-term profitable trading". Therefore, this article will take this as its title and use DX's recent order opening example to tell everyone what contract trading is as much as possible. risk control.
There is no way to avoid risk in trading. Every deal could fail, at least in theory. In fact, a successful trader may lose more times in trading than make money, but in the long run, if the profit scale of winning trades far exceeds the losses of losing trades, then he is still a qualified trader. This may be confusing for novices. Why does it seem like you can keep growing your account even if you lose a lot of money? Let us introduce a concept: profit-loss ratio.
The first key to trading risk management is to determine the profit-loss ratio of the trading strategy. This is easy to understand. When your profit-loss ratio is 3:1, it means that one winning transaction of yours will be able to cover 3 consecutive losses. When traders increase the proportion of profitable transactions through continuous learning, they can achieve positive account growth.
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