The most important and neglected component of becoming a successful trader or investor is risk management. As a trader or investor, capital preservation is a priority. Whether you are an investor concerned about potential changes in the coming months or years, or a day trader who wants to capture small intraday volatility for fast profits, you must have a complete plan. You must plan how much risk you are willing to take before entering each transaction, know how to properly use trailing stop loss and know when to make a profit. You sometimes get involved in trading, and things don't go as planned. You have to get rid of this deal and look for another chance.
Do you know what your own risk tolerance is? How much loss can you afford? Are you taking too much risk because of total capital? Do you allow yourself the opportunity to trade on another day or want to achieve a home run in every trade? You must have a predetermined plan and know your limit based on the amount of capital you plan to invest or trade.
Once you enter the trade, if the market is not good for you with the amount of your planned risk, then quit! Bear the loss. You will lose money when accepting investments and transactions. Expected losses are part of the investment and trading business. The loss is considered part of the operating expenses. Every business has an expense. The key is to manage losses to keep it small. The most successful investors and traders will have frequent and frequent small losses. Understanding that reducing losses is healthy for you. By doing this, it allows you to think more clearly in order to find new opportunities. If you are in a losing trade, it is difficult to see new opportunities clearly. Jessie Livormore's recollection of stock traders cites all of this. "Lost money is the least of the troubles I have encountered. After I accept it, the lost things never bother me. But the mistake - don't bear the loss - this is the damage to the wallet and the soul."
To this day, to my surprise, so many people who want to make money in the stock market or want to be day traders enter the industry without a plan. The least realized is that this is a business. It is no different from any other business seeking to make a profit. You can't just make money by sitting on the side of your seat. While there are risks in the investment and trading business, this does not mean that you must have a gambling mindset. The worst thing any investor or trader can do is keep a losing trade and hope it will return and become a winner. This mistake is fatal. Many traders freeze when they are at a loss. They think that if they leave a few mites in the market, maybe it will turn around. Train yourself to use stoppages to help control risk. The use of stop loss is a necessary condition for successful long-term trading. Learn to bear the loss. When the market turns better, you can come back at any time.
Investment and trading are based on probability. Work with a fixed amount, if you make a mistake, you are willing to lose it. Depending on your total account size, the risk per transaction ranges from 3% to 5%. For some people, this is a very conservative number, but it is best to be conservative rather than too radical. Learn to use trailing stop loss, once the position is good for you to manage risk more effectively. Get some profit along the way at the scheduled point. Yes, you must learn to make a profit. By doing so, you can control your risk more effectively and lock in your profits. Remember that you are investing or trading to make money. Learn to call the cash register.
A common mistake for inexperienced investors and traders is that if they make a mistake, they trade without a pre-planned amount, and if they do, there is no plan to lock in the profit. This behavior often leads investors or traders to commit to hope and prayer, and ultimately to their failure. When many stocks go up straight, think back to the bull market. Many people think that they are not wrong.
I remember that many investors were looking for advice as the stock market went higher. I advise them to profit along the way and use trailing stop loss, but greed makes them think the market must continue to rise. One hundred percent, two hundred percent, and more than three hundred percent are not enough. If they sell shares in a profitable way, they complain that they must pay taxes on these profits. I often wonder why so many people find it easier to rely on losers and get tax offsets, rather than being willing to pay taxes for profit. Those same people now want a 10% return.
Professional-minded traders know that using a few simple and effective techniques can prevent many investors from giving back most of their profits or preventing them from falling into a deficit. The key is to learn how to manage your investment and trade with day traders. Doing so can help you become a better investor.
In order to better equip yourself as a trader/investor
· Learn how to read the chart correctly to see key resistance and support levels.
• Understand and understand how to identify trends in trends and trends.
· Understand that transactions and investments are no different from any other business.
· Control your expenses and maximize your profits, otherwise you will be unemployed.
· Flexibility to adapt to current market conditions.
· Learn and accept the facts of mistakes and bear the loss.
· Learn to make a profit in a profitable transaction.
· If it is wrong, please leave your location.
· When it is correct, scale out and use trailing stop loss to continue to lock in profits, if it continues to be beneficial to you.
Keep it simple and remember that your downside risk must be lower than your upside potential.
Orignal From: Risk management and capital preservation - the key to success or failure of trading
No comments:
Post a Comment