Risk Management System in Trading
- by George Solotarov
We have prepared a list of recommendations on risk management, which are followed by professionals and can be used by amateur traders in their work. These simple rules will allow you to trade effectively, step by step to achieve the desired result, and then to keep it.
1. It is important to plan the expense part.
Based on the experience of our company, the period of trader revealing is in the interval from six months to one and a half years. It is necessary to plan your expenses so that you could comfortably trade for at least 6 months, paying for the trading platform and other infrastructure.
2. Try to reach the trading volume of around 15000-20000 shares per month.
Trading on small volumes for a beginner is ruinous. You will not get the proper development in time, and adaptation will take much more time and money (subscription for the platform, charts, etc.). According to our statistics, those traders who trade less than 15000 shares per month - do not progress and leave the market. There are exceptions, but it is rare.
3. Do not strive to increase the size of the daily stop-loss.
Based on our experience, we can safely say - there is no dependence on profit size on the daily stop-loss. There is an inverse dependence - the higher the size of losses per day, the less likely it is that the trader will remain in the market. Therefore, we should not build a strategy that is highly influenced by daily Stop Loss.
4. After 5 unsuccessful traders - stop trading.
Very often large deposit losses occur after a series of unsuccessful deals. Bad market, a bad situation for your strategy, problems in the Internet connection or physiological problems (fatigue, stress) - all this strongly affects the efficiency of trading and begins to get worse as the number of trades increases. There is a desire to win back, which ruins any trading strategy.
5. Do not try to repulse everything with one trade.
Attempts to win back on emotions lead to making risky deals (often outside of the risk management system and trading strategy) and it leads to even greater losses. Additional help in such situations can be set up the terminal to stop trading and/or risk manager.
6. Calculate the amount that you can lose.
It is important not to lose more than you have set yourself at day\week\month. Sometimes there is a temptation to "trade a little more" and if you lose, you will shorten your time in the market. If the budget is limited and has been designed for a minimum period of time, you simply will not have enough time to get to the result.
7. At the beginning to trade only what you understand.
In the beginning, it is important to trade those situations that are understandable and you do not feel a strong psychological discomfort. Add volume, more position you need to gradually so that only a minimum of comfort is exceeded.
8. If the month is "plus" - learn not to give 30% of income.
Learning not only to earn large amounts but also to keep them at the end of the month is one of the most important skills of a professional trader and you need to strive for it.
If you have any questions, you can always contact our managers for a free consultation. To do this, just write to the chat. Our highly qualified experts will answer you immediately and find the best solutions for your specific situation.
Best regards, Tools Trades team!