Every professional trader understands that mastering risk is crucial for consistent success.
Discover 5 simple but powerful tactics that top professionals use to manage risk effectively.
1/ Daily Loss Limit.
Cap daily downside.
- Set a maximum loss threshold per day
- Cease trading if you hit this limit
- Prevents spirals on bad days
2/ Liquidity Matters.
Stay in tradable assets.
- Prioritize assets that can be easily sold
- Avoid illiquid positions that can trap capital
- Recognize the value of flexibility
3/ Risk Percentage per Trade.
Consistent risk approach.
- Decide on a fixed percentage of capital to risk per trade (e.g., 1%)
- Ensures no single trade can severely hurt capital
- Provides a consistent risk approach across trades
4/ Scenario Analysis.
Prepare for various outcomes.
- Model best-case, worst-case, and likely scenarios
- Understand potential impacts on portfolio
- Adjust strategies based on these insights
5/ Correlation Analysis.
Avoid unwanted overlaps.
- Analyze how assets move in relation to one another
- Avoid overexposure to correlated assets
- Ensures true diversification
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