Why is Risk management so important?
- What is the risk/profit ratio should be in order to make money in the market?
- Which trades are better not to enter into?
- Correct position size
- At what% of the deposit do you need to enter into transactions?
🔵 Greetings to everyone! Today, I would like to address an important topic: position sizing and risk management. How significant are they? Should we adhere to these rules from the start? Let's dive in and explore.
🔵 Let's begin by understanding why risk management is so crucial. It's one of the few factors we can control in trading. While we can't dictate price direction, we can control position size and the risk-to-reward ratio. Consider this: we can't predict the future with 100% certainty, but we can control our actions.
🔵 Now, let's break down the key aspects. The risk-to-reward ratio of 1:3 is easy to explain and comprehend. Why is this important? If you open trades with a 1:1 risk-to-reward ratio, it may not yield substantial results. You'll find yourself making profits and losses in a cycle. Our goal is to find opportunities with high risk-to-reward ratios of 1:3 and beyond.
🔵 The 1:3 rule helps you overcome losses in the long term. If you enter a trade with a $1 risk and a potential $3 profit, you'll only need one profitable trade to offset losses from three losing ones.
🔵 It's unwise to enter a trade if the risk-to-reward ratio doesn't adhere to the rule. Avoid twisting the rules to fit a trade and avoid trading randomly. Be honest with yourself.
🔵 The second important rule is position sizing. Your deposit size doesn't matter. Your position size should range from 2% to 5%. By adhering to this, you can gradually bring your deposit into order.
🔵 By following these two simple rules, you can progressively enhance your results and earn from trading. Successful traders know that risk management is the foundation of successful trading. Don't forget to set stop losses and adhere to risk and reward rules.
#crypto2023 #BTC #riskmanagement #Trading