Risk Management in Trading
Risk management is the cornerstone of successful trading. Without it, even profitable strategies can fail. Key aspects include:
- Position sizing: Risk only a small percentage of your account per trade to survive losing streaks.
- Stop loss & take profit: Define clear exit points to protect gains and minimize losses.
- Risk/reward ratio: Always aim for trades where potential rewards outweigh potential risks.
- Diversification: Avoid putting all capital in one instrument or market.
- Regular review: Analyze losing trades to refine strategy and prevent repeating mistakes.
Implementing strong risk management ensures long-term profitability, reduces stress, and allows traders to compound capital efficiently.