Today we will look at the key things in risk management. You must understand that the market is a living organism, and even if you are 100% confident in a transaction, you must always keep in mind that ABSOLUTELY any transaction can result in a loss.
With the help of risk management you can limit your losses. The most difficult thing for a beginner is fixing losses, since no one wants to lose, but they still came to find those same X's. Psychologically, it is always difficult.
You need to realize that losses in trading are normal. At the initial stage there will be more of them, as you gain skill and hone your strategy or strategies.
It can be compared to riding a bicycle. When you just started riding a bike, you often fell, something didn’t work out, but then after some time you begin to ride it confidently even without using your hands.
It is important to close a losing trade correctly, not wait until the last minute and hope for a miracle. Miracles happen, but not to you))
Sometimes it happens that a trader closes a trade with a profit, but in it, he violated all risk management, opened not according to the strategy, and averaged crookedly/obliquely. This is not success, this is failure.
Example: you can drive a car, follow all traffic rules and get from point A to point B. But you can drive drunk, breaking all sorts of rules, but you will also get from point A to B. You will be lucky a couple of times, and then you will end up in such a way that it is not enough It won’t seem, God forbid you get off with a slight fright.
You can close several trades during the day at a loss, but if your strategy works, then at some point you will catch the trend and not only cover the minuses that you received during the day, but also make money.
When newcomers come to the market, they find/heard some strategy from someone, make a deposit and start trading, catching losses. At the same time, they enter the cutlet and see how the deposit melts. And they don't understand why.
Take a strategy that you think will work. Enter into a trade with a small amount of money so that when you record losses, they will not be critical for you. The more trades you make using this strategy, the larger the sample and understanding of how it works.
Example: When conducting sociological research, they make a large sample of people who are asked questions, thereby increasing the statistics, since if only 10 people were interviewed, then all 10 could give the same answer. Although, if 1000 people were interviewed, the final result would be different.
The more successful transactions you make within the framework of the strategy and risk management, the more money you can enter into each transaction, as you will feel more confident.
How to calculate risks correctly? I recommend using risk per trade and risk per portfolio.
For example, you decided that your risk per trade will be 1%, but no more than 5% on your portfolio during the day.
Example: Your deposit is 1000 rubles. The permissible loss is 1% or 10 rubles per transaction, and per portfolio 5% or 50 rubles. That is, if you made 5 losing trades in a day, then you are not trading today.
Why don’t we trade and why is it necessary?
Newbies will always want to win back, but you are not in a casino. We need to analyze what went wrong (the general market situation, the sector news that came out, or other factors) and at least cool down.
It is important to understand what your risk to reward ratio is. For example: 1 to 1 or 1 to 5. The higher this ratio is, the longer you will be “afloat” if you fall into a series of unprofitable trades.
Hugged everyone and profit in karma!
