Understanding Risk Management In Trading - Part 2
Hello everyone, hope you all are doing good? I'm back with the Part 2 of this amazing series, Understanding Risk Management In Trading. If you haven't read the Part 1, I strongly suggest you that by clicking here. In today's article we would be looking at Risk management in Trading, practically.
Risk management in trading, is a must learn skill for every trader who wants a sustained success in the trading world. Risk management is ability for traders to protect themselves from incurring losses. As a trader, you should first think of how to protect your funds instead of your profits you seek to make from a trade. As popular saying goes, A bird at hand, is better than the thousands in the forest
Not everyday is a win day. There are days when you lose and if, as a trader you don't have a proper risk management strategy, you can blow out, all the profits you have made over weeks, in just a day. That's why it is very necessary for traders to have a Risk management strategy.
Illustration
For me, I have a pattern when trading and that's my risk management strategy. I have certain criteria for both my buy and sell trade entry and if those criteria are not met, I won't enter the market. Once they are met, I enter the market. Before entering the market I set Reward ratio to 1:2. I set my Stop Loss and Take Profit and then enter my trade. I normally use Break Retest Break(BRB) Strategy. Take a look at the image below to understand my strategy.
As you can see from the image above. I set my Stop Loss above the Support level and set Take Profit just some pips below my entry point.
Use A Moving Averages Trading Strategy
For the Moving Average trading strategy, I have a certain criteria for both my buy and sell trade entry and exit. I will wait for Golden cross, after the it, I will enter the trade. I will set my stop loss some below the Golden cross and use RR 1:2 to set my Take Profit. Take a look at the image below to understand my risk management strategy when using the MA trading strategy.
I hope you all found the article interesting and exciting. Do well to share your thoughts about the article in the comment section below. Thanks.
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