Risk Management

Risk management is the most underrated skill of a profitable trader. One bad red day can easily wipe out several green days.

Fig 11_2 - Risk_Reward Chart.png

Reduce your share size if:

  • You aren't well rested.

  • Your state of mind is altered (i.e. you are agitated, nervous etc...).

  • The setup is higher risk.

  • Your stop loss is further away than normal.

Important to remember:

  • Have a maximum daily loss goal.

  • Profit/loss ratio of at least 2:1.

  • Have a predetermined stop loss and profit target before entry.

  • Honor your stops.

  • Track all trades.

  • Enter trades after confirmation for lower risk entries.

  • Don't chase.

  • Don't be greedy.

There are hundreds of trade opportunities every day; chasing a bad trade takes your focus away from finding them.