Thoughts on Risk Management

There's always a degree of risk in trading. Always use a SL, be careful with leverage as it can hurt or help you, and also be sure to do business with trustworthy brokers, don't rely on "magic" solutions as far as signals go, etc.
When you are trading, you will always be exposed to some kind of risk. This means that you will have to prepare yourself for risks no matter what. So, start by determining how much you can afford to risk per trade and building a plan to keep trading in case you make a loss.
Trading in the stock market is all about dealing with risk at different stages of the process. So, be ready to take steps to minimise the risk. Use stop losses and other preventive measures. This is how traders learn to grow and take on calculated risk so they don’t lose money.


Active Member
The key rule of risk management is to determine subjective probabilities of a favourable move and adverse price move and calculate expectancy of a trade. For example is there is 90% chance of 50 pips move and 10% chance of adverse 400 pips move then expectancy of the trade is +5 pips (0.9*50+0.1(-400)), hence you should proceed with the trade.
Risk management, in my opinion, is the backbone of trading. It's similar to having a safety net - it keeps you in the game even when the market becomes crazy. Cutting losses is more than a catchphrase; it's a golden guideline. Always set stop-loss orders, diversify your investments, and never risk more than you can afford to lose.

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