In the end, the trade is nothing else than a risk management. Each and every trade you take risk and every decision you make involves risk:
You use a larger positionsstorlek because you think that setup is really good >> you are likely to lose more money;
You move your stop loss closer to the ”protecting your trade” >> you risk to be stopped;
You control your position but it goes outside of the goals because you believe that the price can turn >> you might leave money on the table;
You decide to let your trade ”run” >> you are at risk of giving back profits and so on …
Risk is a constant companion and every decision involves risk.
This article will help you to understand the risks in a more effective way, and recalls that there are things that many people forget or don’t even see as a risk.
#1 stop change each and every trade and your transactions also
Your stoppavstånd, your positionsstorlek and number of transactions may förädra your trading.
To set a larger SL means that you can lose more per contract and to keep the risk constant, you must bill it. A closer stop loss, on the other hand you can buy / sell more contracts to achieve the same risk.
It is important to keep your risk constant in order to achieve a stable kontotillväxt. By adjusting your transactions, depending on the stoppavstånd, you can control the risk.
#2 Risk ratio – the relative risk
When you enter the trade, put a SL and target. Then you can calculate the reward: risk ratio. RR can then be used as a filter to keep away from shops where the risk is not worth it.
For example, let’s say that your profit is 60%. It means that you on average win 6 out of 10 trades and 6 winners must be large enough to compensate the four losses. It means that your lowest RR must be at least 0,67.
By staying away from the shops with a low RR, you can significantly minimize the risk.
#3 you Should take some of your profit?
The problem with partial profits is that they can destroy your performance. For example, let’s say that you are in a good trade with a 3R, but you decide to take vinstpartiell earnings on K1, on K2 and close the rest at the end of the 3R. Instead of having a 3R-trading, you reduced it to 2R, by taking the partial profit, which is a 33% loss and this is a great thing.
This is often done without a plan and just for to traders react emotionally. It can, however, increase the risk considerably.
ASK-the traders are free traders, or how? Nothing could be further from the truth.
The problem with the ASK-stop is that traders will usually move his SL too quickly.
When you enter a trade you are acknowledging the risk and you know that the price can reach your stop. If your profit is 50%, this means that only 5 of the 10 shops are lömsamma. Then, when you have a ”finer” trading and use price fluctuations to your advantage, you must give the place you want to be stopped out. To move (raise) a SL is to smother a fire. Remember that 5 out of 10 transactions are losses, but you will also see a large increase of BE-business when you move your SL too fast. A system with a profit of 50% can easily be a 30% profit-system. If you take profits often, you will kill your system.
#5 1 vs 1000 trades
Do you want to become a professional trader? Act in 20 or 30 years? Then you will probably take thousands of transactions during your career. You need to understand that 1 transaction is completely meaningless. It is important that you lower your losses and never let them go out of your hand. If 6 weeks, 6 months or 6 years you will not even remember it, so don’t let any transaction destroy your account.
#6 Emotional capital
Let us continue with our previous point … Handelskapital is important (obviously) but emotional capital is even more important. When you lose a trade, you can continue to trade; When you lose an account, you can finance a new. But if you lose (or the account blows up), you lose even more – to such an extent that it scares you and makes you lose interest in trading. Then it is game over.
Keep track, close the trade after a loss and understand that you are in the long term.
#7 Drawdowns – cutbacks
It is only inevitable that sooner or later, you hit a series of losses. The most important thing is to: (1) you never change the system during a drawdown, and (2) always understand why you are losing: it is you who makes mistakes or is it uppställningarnas wrong?