Finance

Risk Management Techniques for Active Traders 

Trading is one of the most elite professionals in the world where almost $6.6 trillion transactions are made every day. But according to the survey, only 4% of traders can be successful in this industry. And the other 96% can never make a career in trading as they continue to lose their trading capital. The main reason behind their loss is not following any proper risk management rule. So, the importance of following proper risk management rules in this industry cannot be described in a word. Because it is the only thing that helps you to stay alive in this market. Let’s explore some amazing risk management techniques which can protect our account balance.

Plan your trade

Plaining is everything in this industry must need to plan for a trade before you go for it. Because you just need to take all the potential profit from each trade. If you are not doing that then you are eventually losing money. So, whenever you are thinking about the opening position then consider. If you can use your risk-reward ratio with proper breathing period. You can consider trading as war because before a war you must need to consider lots of things before making a move. So, you must first need to plan your trades then you can trade according to that. Trading without a plan is like doing gambling in a casino from where you cannot get a positive result in your career. So always make plans for all types of scenarios before entering the trading market.

Maintain the 1% rule

Trading is a place where you are trading money for money and losing money is easier than earning from it. No matter how alert you are during taking any trading decision, you just need to know that you will eventually lose some money in this industry. So, when you are joining the trading industry, you must fix a certain amount of money that you are ready to lose. You can also sign up for a free trial and learn everything about trading by using high end broker Saxo.

We suggest you not risk more than 1% of your trading capital like if you are trading with a $10,000 then you must not take a risk of more than $100. If you do so then it will be quite hard for you to blow your trading capital. You can increase this risk to 2% according to your trading balance and experience. But it will be very suitable if you never use a risk of more than 2% of your trading balance for your safety.

Use stop loss and take profit level 

The trading market is so volatile and so competitive that it can change its direction of movement any time from any place. So no experienced trader can identify those positions and because of this, there are no other options than using take profit and stop-loss levels. It helps you to lock your profit and loss without taking any risk.

Compete for risk-free trading with virtual cash

When you are thinking about joining the trading industry, you need to gather a certain amount for trading. As you work on the accumulation process for the required trading balance, you can trade with the same amount of virtual cash through a demo trading account. Try to double your account at least twice before joining trading with a real trading account. This will help to gain confidence and you will understand the market more clearly.

Trading is a risky profession where many traders lose their money now and then. Always plan before you enter or exit from a trade, use proper stop loss and take profit level and also take a risk that your account can handle. Try to take every precaution before making any trading decision, so that you can reduce the risk exposer.

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