- Analyst AZA
Second Tip - manage the risk
Let’s continue the theme of simple tips for those who want to make money on the stock exchange.
Second Tip - manage the risk.
Seems like very simple advice, of course, you need to manage it, and you are secured, because you are not a gambler! I confess that I, before starting trading on the stock exchange, thought that I'm not a gambling man. I have always been indifferent to the casino and slot machines. It was only when I opened my first transactions on my own, for my blood-earned money, various demons woke up from asleep. Before I had no idea about them. It was a big surprise for me that I’m such a multi-faceted personality, but I cannot say that I was pleasantly surprised - I was confused. I was faced with a major challenge. How can I put those demons under control? I realized that the reason for my worries were unjustified risk on each trade.
Each person has his edge, after which incorporate emotions are turned on and the brain is switched off. To control the situation in trading I had to start to limit the risks, to avoid such situations when my emotions will be able to absorb my mind. A trader makes a blunt and serious error when his emotions are going wild. As a rule, the next day the emotional trader overestimates his actions and does not find the rationale for this behaviour.
Therefore it is necessary to trade in a way that the risk of one transaction will not be critical. You have to imagine before opening the transaction, for example, that the market went against you and you lose your scheduled stop loss. If this is not fantasy does not excite your nerves, and you will not be disheartened, it means that with this amount you are psychologically comfortable, and you do not lose your head in the real situation on the waves trader of currency market fluctuations. Generally, it is advisable not to lose in a transaction of more than 2% of the deposit, and I would recommend limiting risk at 1%. In this case, when you should stop loss, take profit is exposed, you can sleep well and see rainbow dreams. Otherwise, you will suffer from insomnia, nervous, constantly look into the trading platform, cursing everyone and everything (broker and the market), and cursing the price, which is not carried on your persuasion.
And the less will be your stop loss, the more you will be able to make transactions, and thereby capitalize on any market, whether it be forex, stocks, futures or indices. After all, an instrument of labor of any trader is his money on a live account. As long as account is full, you can feel free to go into battle, but if you make unnecessary risk and expense, well, you can blame only yourself. Yes, it is you, not the broker or the price, or analyst who gave the forecast price movements. Because the only things that you can fully control in stock trading are your risks!
It is only you to decide how much you are willing to lose in case of unforeseen situations. After all, all losses are the consequence of the unforeseen situation. Trader will not open a position if he is not sure he makes the right decision.
Control your risks! This rule is universal for any market.
Each person has his edge, after which incorporate emotions are turned on and the brain is switched off.