Principles Of Risk Management

One of the main topics, and perhaps the most important, is the topic of risk management and risk reward.
Beginners often do not take this topic seriously, trying to hit the jackpot in every transaction, risking all or almost all of the capital and not realizing what the consequences of such actions may be.
Whatever trading style you use, whether it's day trading or scalping, the way you manage risk will still be decisive in the question of whether you will be profitable at a distance or not.
Margin trading gives a lot of advantages, but most often it ruins newcomers who open deals with a large volume and quickly lose money when the price goes against them.
The ability to manage risks correctly will help you stay in the game for a long time and be profitable at a distance.
Focus on protecting what you have.
In the pursuit of profit, traders forget about risks, forget about capital protection. It is important to remember that after each loss, the percentage of profit that needs to be returned to breakeven increases exponentially, depending on how much you lose.

Fundamentals of Risk Management
The market is changing every second and at any moment there may be news that will make the price go against you.
The desire to risk everything in one transaction leads to the closure of novice accounts, instead, it is better to manage risks and stay in the game for a long time, making a profit.
Anything can happen in the markets and it is simply unwise to risk everything in one transaction.

You must remember:
1. You should not risk more than you can afford to lose.
2. Each trade must be opened with the correct risk reward ratio. (RRR)

The Risk Reward Ratio (RRR) is how much you are willing to lose, compared to the expected profit in each trade.
You should strive for a ratio of less risk / more profit.

One of the best ways to manage risk is the 1% method.
This method of risk control means that in each transaction a trader risks 1% of his capital.
This is correctly used even by managers of large hedge funds and they do it for a reason.
Do not think that only 1% of the capital can be traded. You can use at least all your capital for trading, but your stop loss should be no more than 1% - this is your risk. You can use leverage if you need to, but don't lose more than 1% in one trade if you want to become a professional.

The Best Risk-Reward Ratio For Trading
Before opening a position, you should know how much you can lose and how much you expect to win, and the ratio should not be lower than 1:1.
A ratio below 1:1 means that you lose more than you can win, and this is an extremely dangerous activity that can eventually lead to the loss of the entire account.
If the ratio is 1:1, you will be at breakeven, even if 50% of your trades are unprofitable. If the ratio is higher than 1:1, then you will be in the black, even if more than half of your trades are closed in the negative.
Do not forget that it is impossible to win in every transaction and without proper risk management, such a game will lead to big losses.

Do not forget about the rules of risk management, use a profitable strategy and act according to the rules, do not give in to emotions and then success awaits you.



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