Why Risk Management is so important ? (read)

Hello traders, I'm making this post in order to help the community, most of you focus to much in technical analysis but let's take back to basics a put things clear.
Before continuing reading make sure to give a like this will help the community use proper risk management.

Okay let's begin.

For every trade that you take, there is a certain scenario playing out. The moment that you clicked, for that moment of time, there were a certain number of market participants buying a certain amount and there were a certain number of market participants selling . Do you believe that the same participants transacting when you clicked for one trade, are the same market participants transacting when you clicked for another trade? Absolutely not; it is an impossibility. Every moment there exists market participants entering and exiting , anything can happen.

Now let's talk about simple math : This is simply a conceptual series of 10 trades, taken one after the other from a beginner perspective

let's us act as a beginner: if at the beginning you risk more than expected then it will take you a lot of work to recover from that DD%. Make sure to have a proper risk modelling and follow the rules to survive. New traders execute trades with certainties '' this loos good , I will risk more'' . ''I will risk more in this one because I need to recover my previous loss'' . ''I lost the previous one i will risk less''

Here is where the problem occurs:

When you modify parameters in your risk modeling it will have a strong impact in the outcome. what happen in you risk 3 % in the 5 first trades and you end up losing ? you will end up in serious problems. What if you risk 2 in the first trades and you end up losing and then you say ok I will risk less because I'm losing to much and that trade end up making a 1 to 6 risk reward ratio.Hope this example was clear.


Now Let us say for example that you took 10 trades with proper risk management ? the outcome is totally different.

As you can see , we risk the same amount every time and we only need few trades to make decent profits. Proper risk modelling will allow you to have losing trades and still making profit. you can have a poor win rate like in this example and still end up positive. The only difference between the first trader and the second one is that in fact one has a trade by trade approach and the second has a series per trade approach. This might be hard to understand but if you really want to continue in the long you must use a proper risk modelling system.

Here is where the solution is :

• EVERY TRADE IS UNIQUE , ANYTHING CAN HAPPEN.
  
  
• MANAGE YOUR EXPOSURE OR YOU WILL HAVE NOTHING LEFT TO MANAGE.
  
  
• PRO traders understand that in order to have results they must adopt a series per trade approach
  

Please do follow and comment your thoughts. let me know in the comment section what do you think about it .