Risk Management Technique
|Trading is not about being right or wrong, but it’s about seeing the market in probabilities. Trading is the act of putting one’s hard earned money in the market (at risk of losing it, without fear) under circumstances where one has an edge, a higher change or probability of price action going in one’s favour, while following strict risk & money management rules. Trading is not a quick get-rich scheme. Rather, it is about mastering the technique to preserve one’s capital. When one learns how to manage the risk and preserve capital, profit will come naturally, when when one focuses on making profit, it will most likely result in losses. The holy grail in trading is a combination of Trading system that provides an edge, Risk Management and Proper psychology.
A trader is a risk manager. His/Her job is to protect capital and manage the trading risks. In trading,losses are part of business and must be accepted as a cost of doing business. A business has revenues and costs, and cost is always going to be incurred, but as long as the revenue is larger than the cost, then at the end of the day it is still profitable. Trading result is measured in a series of trades, not in a trade by trade basis. Risk Management is overlooked by new traders due to the unwillingness to take losses when they should have been taken, and because of the hope that things get better or positions go back to break even. The number one reason for failure of many trader is poor risk management and inappropriate position size (overleveraging).
This text is taken from opening slides of the Risk Management Technique Seminar we conducted on January 16, 2017 and you can watch the recording below:
Risk Management Technique Seminar Recording
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