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If you read interviews with top traders, one of the common factors that you will find stressed repeatedly is the idea of not losing money. In Sport lingo, you have to be able to play great defense. Whether forex trading, stock trading, or doing trades in commodity futures Lucas Moura Jersey , the bottom line is the same.
Yet too many beginner and intermediate traders are more interested in playing great offense first. They are more focused upon making lots of money in the markets, and not nearly interested enough in keeping the money that they already have!
However, the latter is critical to your success. Although it is obvious that in Trading, you have to risk money in order to make money, the idea is to control that risk so that it is always strictly limited and so that you remain in control of the situation at all times. In other words, we are talking about what the investment banking industry calls Risk Management. It is just as vital for the private trader at home as it is for the major investment banks.
The reason that investment banks regard risk management as essential is because without it Kyle Walker-Peters Jersey , they would go bankrupt extremely quickly. It is at the heart of both their success and survival. Hence, if it is good enough for them, it should be good enough for you too.
Beginner traders have no idea of how to manage their risk, even as a concept. They put on a trade according to some poorly defined criteria, and when the market goes against them, they have no idea at what point to get out of the position and will let it worsen until it is simply too painful to retain.
The smart trader Kyle Walker-Peters Jersey , however, places risk management at the heart of the entire trading plan from the very beginning. If you realize that in this game, the target is not only to make money, but also not to lose the money you've got, then you have made great progress before you even place your next trade.
Let's put this a little more graphically. If you were to lose, let's say for sake of argument Kieran Trippier Jersey , half of your trading capital, then you have a huge uphill task ahead of you. You will have to achieve a fully 100% return, simply to break even! You will have to do even better than a 100% return to actually go into profit. Now, if you realize that very few of even the sharpest hedge funds make 100% return on capital in a year, never mind all the other more mediocre players out there, you will realize what an outlandishly monumental task this really is.