Three Rules To Risk Management by James Stanley
Itís Not About Guessing
Itís not just about how much you make or lose on each trade; itís how you manage those profits and losses that make all the difference in your success as a trader. Hereís a look at three rules that may give you a different perspective.
If there is one dividing line between professional traders and everyone else, itís risk management. A great trader often categorizes himself, first and foremost, as a risk manager. If you canít control your losses, it doesnít matter how many small wins you may be able to accumulate. In this article, I will go over three rules of risk management that traders can easily implement into their approach.
AND THE RULES AREÖ
Rule 1: No trade idea is strong enough to risk more than you might make.
What do you think your odds of winning any given trade might be? Fifty percent, perhaps. Most new traders think that to make money in this business, you have to win at least half the time. So many new traders focus on just that: trying to win every trade with the goal of winning more often than losing. This type of thinking can entail losing sight of the bigger picture. When new traders open a position that moves against them, they hold on, hoping that it comes back to their initial entry price so they can win on that one trade.