I participated in various trade and investment interest groups and forums on the Internet over the years, and never ceases to amaze me how little attention is paid to risk management. Whether you trade stocks, forex, commodities, futures or other instruments, most amateur traders continue to focus only on trade entry.
In my experience, most issues that inexperienced investors to focus on finding the next hot stock or the best trading system for trading stocks, forex and commodities. All are hoping to catch a few big winner just scouring the internet for some hot tips. Or, they think they can be hot trading system out there that will make them a millionaire in no time. Or, if you are focused on short-term trading, they hope to learn that a trading system that will give them 90% of the winners, and profit month after month.
Therefore, the financial industry continues to prey on these views with a myriad of books and trade. Brokers home you want to open an account so that they can sell you the latest and greatest ideas in the stock market, while charging their accounts with their discount will you sell the idea that you can make big profits just by using their trading platform and through a number of technical indicators.
And, of course, the biggest fraud in the professional money managers who promise a consistent profit on unwitting investors. We just realized the biggest fraud of all, with a potential $ 50 billion Ponzi scheme run by an ex reputable money manager Bernie Madoff.
Since he was so well known on Wall Street, Madoff was able to convince hundred investors that it could be profitable every month. All the while, he was simply looking for new money to pay off the original and oldest investor. There were many examples like this, but Madoff scam is clearly the biggest scam of all time.
Bottom line is, there is no such thing as the Holy Grail of trading! There is no one trading method or system that will generate huge returns for everyone, from year to year. History is wrought with hundreds of examples of trafficking in a legend that he was big, and then crashed and burned.
The best traders go through inefficiency, and they accept it, because they know that in the long run, their trading methods will provide strong returns. However, they do not expect to get 100% on your money every year, and they do not expect to make money every day, every week or even every month. Very few are capable of such returns, and those who will not share your strategies with the public!
Professional traders are also worried about having a trading system that is right 100% of the time. They know that this is impossible. All of them are engaged in finding the edge that will eventually be profitable. On the other hand, most amateur traders are worried about it right, instead of being profitable. They can not bear the thought that losing trade. Professional traders know that losing trades are part of the game.
One thing all the best traders do have in common, however, that they know how to manage the risk! Because they know that markets can involve them at any time, they focus more on managing risks in their portfolios, but the specific entry and exit in the trading model.
Most amateur traders can not seem to get past the idea that the initial trade entry, or stock selection, is not the most important part of any trading model. That's what you do after you enter a store that is more important. And more important than knowing when to exit the position is learning how to manage risk.
One popular concept in the world of trading is the idea of reducing the risk at 1% or 2% of shares in your account at any store. For example, if you have $ 100,000 in the account, then you should only risk $ 1,000 or $ 2,000 on any given trade. If you want to buy XYZ stock at $ 20 and you found that you get from the store, if it goes down to $ 19, then you will store more than 2,000 shares.
This is a good start, but not the end of risk management. You can limit risk to 1%, if you want, but if you do not have the discipline to keep your trading rules, and you take a trade that you should not, you will still lose and lose quickly! This is just one example does not control rizik.Slijedi list of do's and don'ts when it comes to risk management.
Do not over trade. This can mean risking too much in any position, or trading too much, simply for the thrill. With this in mind, having developed the entry and exit rules for your system, stick to them! Do not take trades that do not indicate just because you feel the need to trade!
Do not trade the markets that are highly correlated at the same time, unless doing some sort of expansion of trade by buying a market, and shorting the other. Also beware of the market, which inversely related. For example, if the Japanese yen is going up and the Nikkei index goes down, do not buy the yen and the Nikkei short! You simply doubling your bet!
If the volatility in the trading position dramatically, consider leaving some of his positions.
Do not start in the hope that a site will turn into a big winner. You check your emotions at the door when you enter your trading room. Never marry for position. If you have a profitable strategy, it is a lot of trades over time they will gain, not a big winner.
Absolutely, positively know where you get the position before you enter a new trade!
Absolutely, positively know how you put your stops on your positions!
If you have a bad day of trading, trading week or month of the trade, take a break! When you do not take a break for a long time, our judgments trading can become blurred, and we begin to break Rule # 1 When you break this rule, it is time to step away from the trading desk for a while.
If you are on a losing streak, and its capital is reduced, reducing the risk!
Finally, when you take some profits, take them out of your trading account, and diversify your investments! Although May you have a diversified portfolio of traded by your trading system, should continue to invest in a completely different markets, such as real estate, bonds, art, goods, or even another business.
Once you learn about the importance of risk management, you will be one major step closer to becoming a profitable trader.
