I'm now reducing my max % risk per trade from 2% to 1%.
The reason for this change is simple. There were times when I felt really, really uncomfortable about the amount of money that I'm leaving on the table, after taking a trade.
And this feeling of unease is NEVER a good thing, as this could potentially goad me to really screw up on my trade management.
I had thought that having a 2% risk was something that I could live with.
I guess I was wrong.
So let's see how my psychological reaction would be, now that I have slashed my risk.
Showing posts with label Risk Management. Show all posts
Showing posts with label Risk Management. Show all posts
Sunday, July 12, 2009
Sunday, July 5, 2009
4th of July
When I was a student in the US back in the late eighties, I used to look forward to the fireworks display everytime on the eve of the US Independance Day.
I had fond memories during my 5 1/2 years stay there, in Akron, Ohio. One of the great things about the American people is that they keep coming up with cool new technologies. America is such a conducive environment that really foster this spirit of innovativeness. They're not afraid to lose - they would get up and do it again.
In a way, trading is quite similar. In order to gain, you need to risk a bit of your capital. There's no such thing as a "surefire way to make money" in this business.
Because there's always risk involved in this business, it is therefore, imperative that one learns how to manage the risk properly, before you start thinking about the potential profits.
Managing risk is part of money management. Do this well, and the profits will take care of itself.
I had fond memories during my 5 1/2 years stay there, in Akron, Ohio. One of the great things about the American people is that they keep coming up with cool new technologies. America is such a conducive environment that really foster this spirit of innovativeness. They're not afraid to lose - they would get up and do it again.
In a way, trading is quite similar. In order to gain, you need to risk a bit of your capital. There's no such thing as a "surefire way to make money" in this business.
Because there's always risk involved in this business, it is therefore, imperative that one learns how to manage the risk properly, before you start thinking about the potential profits.
Managing risk is part of money management. Do this well, and the profits will take care of itself.
Monday, June 29, 2009
Risk
Despite what you may have heard from the "experts" out there, there is not a single soul that can tell you what's going to happen next in the market.
Only God knows what the future is like. The "experts" are certainly not God!
Because we don't know how the next price bar is gonna look like, the only thing that we can do is to determine how much risk you're going to take, when you enter a new trade.
Or to put it in another way, how much money you're willing to lose if you're wrong about the market.
We need to focus on risk more than thinking about how much money we can make out of the trade.
Ask yourself "How much money can I lose in this trade?", before pondering about "How much money can I make in this trade!"
Only God knows what the future is like. The "experts" are certainly not God!
Because we don't know how the next price bar is gonna look like, the only thing that we can do is to determine how much risk you're going to take, when you enter a new trade.
Or to put it in another way, how much money you're willing to lose if you're wrong about the market.
We need to focus on risk more than thinking about how much money we can make out of the trade.
Ask yourself "How much money can I lose in this trade?", before pondering about "How much money can I make in this trade!"
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