If you keep losing as a trader, then this article is for you.
A profitable trader is one who is able to weather whatever Volatility storms, survive and not lose entire Capital plus profit.
At the end of the day, it is how much profit you are able to keep that determines you are a successful trader not how much profit you made.
Lots of Traders get frequent losses not because their analysis is wrong, or they don't know how to Trade.
It's simply because they don't know how to properly manage their portfolio and stay profitable.
Let's look at how to properly manage your risk as a trader into profitablity.
Position Sizing:
This is one key reason you are always blowing your account.
Position size has to do with the percentage you use on a trade as against your total capital.
Professional, you don't risk more than 2-5% of your capital on a single Trade.
A good trader is one who knows the market doe's not belong to me so anything can happen.
A good trade can be made invalid by one single fundamental.
When you risk 50% of your capital on that single Trade, when the sharp drop comes, you end up losing way more than necessary.
Risk Reward Ration
A trader enters a trade with $100
SL is at -$80
Tp is at +$20
This is a very poor trade.
Why?
If you take just 2 of such trades and hit SL, your account is gone.
Rather it should be the other way round.
Trade $100
Tp $80
SL $20
Now this is a 1:4 Risk to Reward (RR)
It means that every Time you Hit TP it is 4times bigger than your SL.
So in this case if you lose 3 trades at once and Win 1, you are Automatically in profit.
The profit from one wining trade covers Loses of 3 bad trades.
With this, even you take 100 trades and 60 hit SL, you are still profitable.
Over Trading
One way to stay profitable and manage risk properly is by avoiding Over trading..
Put your hands on your head and repeat after me.
-I must not trade everyday.
-I must not trade everything I analysed.
-I must not trade every signal I see.
Over Trading exposes you to unwanted risk.
Over Trading blurs your eyes from seeing clearly and making impulsive decisions sponsored by Mr Emotions.
You may be on a wining streak and want to continue trading cause it's your lucky day, but what you don't realize is your accuracy drops with each TP hit.
It's like taking a glass of Alcohol. The more glasses you take, the more unclear your eyes become.
You may start seeing men as trees.
Same way, after every successful TP, you get excited and that excitement becomes the palmwine that closes your eyes to see some red flags in a trade.
The excitement can even sponsor your village people into whispering "Increase your leverage and capital on the next trade to get more".
Journal your trades.
Most traders don't document their trades.
Why did you take the trade?
What is your day expected profit?
What is your expected Loss?
How much was made on that trade?
How much did you lose?
Why did you lose? Did you break a rule or market happened?
All this are part of what you document before and after each trades.
Stick to your rules, strategies and target.
I'll keep this short.
As a trader, you should have your personal trading strategy and rules based on your risk tolerance and goal you want to achieve.
One sure way that has been sending people to village is jumping from one strategy to another because someone says it's working for them.
Also breaking and bending your rules to suit your emotions.
Stop that and stay one place.
Practice evaluating your performance periodically.
Alot of traders just trade anyhow.
Take trading like a Job.
Or like your baby.
Every now and then, take a break and evaluate how your trading activity has been.
Preach for yourself.
Advice yourself.
Learn, relearn and unlearn.
This is where your trade journal becomes useful.
Normalizing Taking breaks.
When you notice you are making too much profit, it's okay to take a break, enjoy refresh and return.
When you notice you are losing too much, it's okay to take a break, Restrategize, evaluate, learn again.
When you take breaks, your can make more better informed decisions.
When you take breaks it helps you to gather yourself together and perform better.
Master your emotions.
Greed and fear are 2 key Emotions you should master.
No matter how juicy the trade looks, when you have reached your targets, close for the day and do something else.
Have a strong conviction before entering that trade so that when it gets Volatile fear won't make you close a position too early.
Closing in fear is not the same as closing when market direction has changed.
