If You Think Trading Is Risky, Why You Don't Use Risk Management?

[trupero_uno]

I want to share the important of Risk Management in such trading event this kind of management is important for every action made not only in business. Risk Management generally is "the identification, evaluation, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinator and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events[1] or to maximize the realization of opportunities" referring to https://en.wikipedia.org/wiki/Risk_management.

In trading, risk management is used to avoid further loss and if possible to revert on profit. This risk management is necessary since none of trader will enter the market in always good position even the best trader ever, sometime they will make a mistake. As a human, this is reasonable and acceptable surely.
But what can make them profit beside good analyze for both Technical Analysis (TA) and Fundamental Analysis (FA) is the using of Risk Management.
There are a lot of articles or videos to present a risk management, I will grab it here and added in my own sentence for some. Just a few description, you can be seen from this link the effect of risk management into trading: https://www.xtb.com/en/learn-to-trade/introduction-to-risk-management.

Here are some of Risk Management strategies:

1. Create the trading rule. This rule should be obeyed in discipline way for your successful trading, such as how much is the profit, what kind of market/tokens to be entered, etc. This rule can minimize the psychological effect while you are trading such as fear and greedy. Remember, greedy will make you lose on trading since certain profit obtained will be vanished in second by the price volatility. So, if the targeted profit has been earned then take it. Here is link as the sample of trading rule: https://www.quora.com/What-is-the-best-risk-management-strategy-for-trading

2. Plan your trading. In this planning, you can create how much is the profit targeted and the loss accepted. For more explanation, this link can be seen : https://www.investopedia.com/articles/trading/09/risk-management.asp . From that article, stop loss mean cut loss as the amount of loss that will be accepted on the trading. While for profit taking, here is a good link to understand more how to calculate the profit based on risk: https://www.investorsunderground.com/what-is-day-trading/risk-management/. Even in the crypto, there is special thing to be considered with the pump moment that will create the profit more than 100% even can reach 400% if a trader is able to enter the market in right moment and exiting on proper time. There is other advantages of high volatility in crypto, if we entered in wrong position (buy while the price later is down), these actions can be taken: Hodl with great patient to wait the price going up, cut loss by selling on certain percentage price as set on planning, or do averaging buy still hodl first buy and buy again on dip price. On certain time set in planning, second buy can bee sold on certain percentage of profit including the first buy or if we optimist the price will be higher we can let hodl the first buy while see whether the price is going to up or down. If the price is going down, we can do second buy on certain dip price to obtain another profit. If appears that the price will be long to exceed first buy, we can do cut loss the first buy and seek other chance to buy again.  

3. Use at maximum 30% of available trading fund on a transaction to give allowance for risk management above.

For additional explanation, here are the links for risk management:
https://www.youtube.com/watch?v=3rftcz6Tktk
https://www.youtube.com/watch?v=0MV7vNeuZSU (Risk Management for New Traders)
https://www.tradeciety.com/why-most-traders-lose-money-risk-management/ (9 Tips That Will Improve Your Risk Management RIGHT NOW)  

4. Be Discipline for your rule and plan created.

[1713891167]

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[1713891167]

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[colkcolk]

This article is very useful to be applied in trading, so not only technical or fundamental analysis but to use also risk management. I seldom see the posting of risk management, and now realized how important of risk management is for trading. Thanks for your sharing dude!

[trupero_uno]

Exactly, trading should not count on just analysis whether technical analysis or fundamental analysis since there are still uncertainties internally or externally. Internal uncertainties are coming mostly from our psychological factors such as greedy, too much fear, etc. Then Risk management will reduce that psychological factors into our trading.

[hurry_hore]

It is interesting to know more about Risk Management, crypto trading is a high risk business and it will be good if risk management is used in this kind of trading since the volatility is high. But how about hodling, does it still need risk management?

[herurist]

I want to share the important of Risk Management in such trading event this kind of management is important for every action made not only in business. Risk Management generally is "the identification, evaluation, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinator and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events[1] or to maximize the realization of opportunities" referring to https://en.wikipedia.org/wiki/Risk_management.

In trading, risk management is used to avoid further loss and if possible to revert on profit. This risk management is necessary since none of trader will enter the market in always good position even the best trader ever, sometime they will make a mistake. As a human, this is reasonable and acceptable surely.
But what can make them profit beside good analyze for both Technical Analysis (TA) and Fundamental Analysis (FA) is the using of Risk Management.
There are a lot of articles or videos to present a risk management, I will grab it here and added in my own sentence for some. Just a few description, you can be seen from this link the effect of risk management into trading: https://www.xtb.com/en/learn-to-trade/introduction-to-risk-management.

Here are some of Risk Management strategies:

1. Create the trading rule. This rule should be obeyed in discipline way for your successful trading, such as how much is the profit, what kind of market/tokens to be entered, etc. This rule can minimize the psychological effect while you are trading such as fear and greedy. Remember, greedy will make you lose on trading since certain profit obtained will be vanished in second by the price volatility. So, if the targeted profit has been earned then take it. Here is link as the sample of trading rule: https://www.quora.com/What-is-the-best-risk-management-strategy-for-trading

2. Plan your trading. In this planning, you can create how much is the profit targeted and the loss accepted. For more explanation, this link can be seen : https://www.investopedia.com/articles/trading/09/risk-management.asp . From that article, stop loss mean cut loss as the amount of loss that will be accepted on the trading. While for profit taking, here is a good link to understand more how to calculate the profit based on risk: https://www.investorsunderground.com/what-is-day-trading/risk-management/. Even in the crypto, there is special thing to be considered with the pump moment that will create the profit more than 100% even can reach 400% if a trader is able to enter the market in right moment and exiting on proper time. There is other advantages of high volatility in crypto, if we entered in wrong position (buy while the price later is down), these actions can be taken: Hodl with great patient to wait the price going up, cut loss by selling on certain percentage price as set on planning, or do averaging buy still hodl first buy and buy again on dip price. On certain time set in planning, second buy can bee sold on certain percentage of profit including the first buy or if we optimist the price will be higher we can let hodl the first buy while see whether the price is going to up or down. If the price is going down, we can do second buy on certain dip price to obtain another profit. If appears that the price will be long to exceed first buy, we can do cut loss the first buy and seek other chance to buy again.  

3. Use at maximum 30% of available trading fund on a transaction to give allowance for risk management above.

For additional explanation, here are the links for risk management:
https://www.youtube.com/watch?v=3rftcz6Tktk
https://www.youtube.com/watch?v=0MV7vNeuZSU (Risk Management for New Traders)
https://www.tradeciety.com/why-most-traders-lose-money-risk-management/ (9 Tips That Will Improve Your Risk Management RIGHT NOW)  

4. Be Discipline for your rule and plan created.

Some people don't use risk management because they have wrong mindset, trading is easy way to make money. Second reason is they have a lot of money, they use martiangle strategy but when down trend happen in long term period, their money will stuck. People enter real market usually not see risk management but how they can make money, big mistakes. Your post really and I hope can give valuable knowledge for newbie about risk management, first thing they should know.

[Indrawan77]

Yeah risk management is very important aspect to prevent big lost, but not all people are aware of this thing, and some traders tend to break the rules because they saw the big chances to earn and put all the money in, sometimes is difficult to be discipline especially when we saw a big chance to make big profit, but risk management need to be acknowledged by all the traders whether newbie traders or professional traders, hopefully by learning this people will become more careful and know how to manage the risk

[Ctn]

I like it man, the three rules of yours :- Create the rules, plan the trade and limit the trade! This is how I am looking at your whole article here. These are the three main points here and yes they are worth following all the time. I mean this can give us the swiftest way to trade our coins and we will help ourselves minimise the trade losses with this. Because we already screening out the possibility of loosing by planning and executing the same. So yeah risk management is vital part. There are always risks involved, they cant be removed completely but they can be minimised always.

[yndye]

I like it man, the three rules of yours :- Create the rules, plan the trade and limit the trade! This is how I am looking at your whole article here. These are the three main points here and yes they are worth following all the time. I mean this can give us the swiftest way to trade our coins and we will help ourselves minimise the trade losses with this. Because we already screening out the possibility of loosing by planning and executing the same. So yeah risk management is vital part. There are always risks involved, they cant be removed completely but they can be minimised always.

Referring to a famous quote "If you fail to plan, you plan to fail". Some just ignore this and just go on with what they are doing without even a trading plan. You need to have a weapon first before going to the battle because trading market is like a battlefield. If you want to be profitable in trading then you need to have consistency and not just one time big time gain and then the next day you lose all your gains because you hold on to your coin even though you know that you are already at a loss. Being consistent with your plan is the key and if you have a plan, follow it and see if it is effective cause if it is not then you can revise it until such time you can become profitable using it. It's try and try until you succeed. If you have a plan then you can manage the risk.

[Herbert2020]

trading is risky of course, but trading bitcoin is riskier because the market is small and that sometimes makes it unpredictable, then trading altcoins is a thousand times riskier because their markets are not only small but they are all manipulated.
so for instance when you want to get involved with trading altcoins you are not only taking the risks of "trading" but also taking the risks of "pump and dumps".
in other words all the things you said here are good and correct but they are almost useless when trading altcoins. there is no TA, no analysis whatsoever in most of them and all of them are manipulated. so you have to un-learn everything you know and start learning how to deal with pump and dumps and how to make profit from them.

[trupero_uno]

Thanks all for your valuable feedback on my posting, this risk management need our behavior for discipline then it can be trained and exercised.

trading is risky of course, but trading bitcoin is riskier because the market is small and that sometimes makes it unpredictable, then trading altcoins is a thousand times riskier because their markets are not only small but they are all manipulated.
so for instance when you want to get involved with trading altcoins you are not only taking the risks of "trading" but also taking the risks of "pump and dumps".
in other words all the things you said here are good and correct but they are almost useless when trading altcoins. there is no TA, no analysis whatsoever in most of them and all of them are manipulated. so you have to un-learn everything you know and start learning how to deal with pump and dumps and how to make profit from them.

I am interested to comment on your feedback especially on manipulation and pump & dump, as my intention of risk management is general then I think it should be applied also in manipulated market and pump-dump situation. As long as I notify, common TA on trading as mostly using graphical data indicators seems not work on crypto in general so my definition of TA in crypto is mostly on order volume including buy and sell wall. Then risk management with the analysis added by latest news on the token to be implemented with tight discipline. One of discipline to follow rule sample is "Not sell on low price if we got dumped, wait other pump come".

[richcorner100]

This usefull article for newbies trader, when i started in to crypto trading i dont have any trading plan and risk management so i loss much money. I been loss also cause greedy and can not manage my emotion. Dont be greedy and keep patient is very important in trading to get profit consistent.