NUMBER ONE TRADING FOCUS—RISK MANAGEMENT

Discussion in 'For novice traders' started by Francmorio, Sep 28, 2017.

  1. Francmorio

    Francmorio Member

    As most trading books will explain, risk management is the key to survival and what trading is really all about. While it may sound like a cliché, the hard truth is that consistently profitable trading, in my opinion, significantly depends on proper risk taking and risk management combined. Winning traders follow a tried-and-tested plan based on rules or on a defined set of criteria. Winning traders recognize the importance of risk management and of money management. As you will release, among losing traders is that most guess and hope and usually say, when asked about placing a stop-loss or taking a profit, “I’ll think about it.” Always remember that when trading with a set of rules, you will never be 100 percent right. But if you do not follow a set of rules, you increase the odds of being 100 percent wrong in your trading. If you manage your trading risks and execute promptly on the trade signal, then you increase the odds that you will be successful. When trading, your mind can play tricks on you. You start to anticipate a buy signal only to act on a false signal. You need to learn when and how an actual signal is generated and what and when you should trigger the action to initiate a trade. When you are trading market signals by a predefined set of rules and a set of criteria, then the mind cannot play tricks on you. When a signal says buy, then buy; when a signal says sell, then sell. It’s that simple. Generally speaking, from my experience, if a trader says, “I am tired of this,” and decides not to take the signal, that ignored signal is the one that becomes a big winner. If you have traded before, you may relate to that syndrome. For day traders in stock or stock index futures, this usually happens in the last hour of the trading session!
     
  2. NewbieTrader

    NewbieTrader Member

    Good stuff, thread starter!
    Unfortunately some people think risk is something that we can erase from trading. While trading itself will remain very risky no matter what. Manage your risks, people!
     
  3. It is absolutely must that we have our entire focus on risk/money management, as it could be the way towards making money and towards achieving positive results as well. I have done just that and it has helped me with making good profits.
     
  4. NewbieTrader

    NewbieTrader Member

    that is true. hopefully new traders are willing to take time to learn about risk management before they start trading. yes, experience is the best teacher, but it may be hard to recover from a loss especially for a newbie.
     
  5. andengireng

    andengireng Member

    So many examples of cases where a trader who has a good trading strategy, but the transactions that do not even make a profit, but in the end even lose money. This can only happen if a trader has bad money management. Examples that often occur are: Does not using Stop Loss, Stop Loss is too small, so easily hit before the price reverses direction in accordance with the original forecast of the trader and last, Stop Loss continues to be widened in the hope that the trend will reverse in accordance with the original forecast of the trader.
     
  6. Tengkorakfx

    Tengkorakfx Member

    I agree with you due to risk management is crucial thing and very important for trader. Of course we have to always try and practice to have many experience then we can know the best way and we can trade better than before.
     
  7. NewbieTrader

    NewbieTrader Member

    yup. and that is the thing, experience. one cannot have enough. i have been trading for almost two years now, still i get new experiences every trading day!
     
  8. Tengkorakfx

    Tengkorakfx Member

    More often we do forex trading, it will be increasingly also experience and knowledge that we have about forex trading itself. then keep on trading as well as possible.
     
  9. NewbieTrader

    NewbieTrader Member

    that's true. experience is the best teacher, eh? :D
    however it's different for newbies. they cannot rely solely on this. they need to at least have enough skill and knowledge before letting experience teaches them.
     
  10. Tengkorakfx

    Tengkorakfx Member

    I think it's not a big deal if the newbie wanna keep it to try. They will find many lesson and will understand better than just reading some books or articles.
     
  11. NewbieTrader

    NewbieTrader Member

    yeah there are many good and free sources online now. just choose the right one. because unfortunately some say they provide free material, but ended up just promoting their service.
     
  12. Tengkorakfx

    Tengkorakfx Member

    Well, we can take from babypips or other resources. As well as from FreshForex website, they provide master class...
     
  13. NewbieTrader

    NewbieTrader Member

    Yeah I just followed FreshForex last webinar last week. November 14th, it was. If you're too late to join any of their webinar, you can just go on to their website and check the previous webinars.
     
  14. andengireng

    andengireng Member

    Switching technique, the technique is done by closing the loss position and immediately taking a new position in the direction of the next price movement. The idea is to recover losses caused by the position of the previous transaction. This technique is more effective if it is done when there is a rapid and drastic change in price direction.
     
  15. andengireng

    andengireng Member

    Forex trading can be directed to if done speculatively without using correct risk analysis and management. There is a risk management concept called Risk Reward Ratio (RRR), which is a comparison between risk and the expected outcome of each transaction.
     
  16. Tengkorakfx

    Tengkorakfx Member

    But before we're going there, we should learn some trading systems including on how to analyze the market with a proper technical analysis that can give you the insight of where the price will be going. I really recommend for newbies to learn support and resistance first...
     

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