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Managing Risk in Trading – Any Tips?
Risk management is always on my mind when I am trading. Anyone got tips on how to handle it better? I know there a lot of advice out there, but it is easy to get overwhelmed. Been thinking of using a platform with built-in tools to help manage it, but not sure which one is the most straightforward my friend told me can use Tiger.
I am not looking for something super complicated, just something to keep track of my trades and manage risk better.
Very appreciated.
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Good question...
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Stop losses (SL) are a must, and should be a fix amount depending on how much of a risk you are willing to take, for example:
$500 fund - 10% SL (or $50) until you double your account, once you are down to $450, reduce SL to 5% till you get back to $500, and further reduce SL to 2.5% once you get to $400.
Once you reach $1k, you can decide if you wanna keep your SL at 10% of $1k.
The idea is to double your "initial capital" before you increase your SL in nominal value. The SL % should also gradually reduce once you get to a substantial amount so to preserve your capital. The key is to never keep your SL high to recover losses since that will more often than not take you to the other side.
Ultimately it's down to capital preservation for me, hence i'm always more conservative.