Risk Management Mindset

[MRY]

Newbies often expect quick profits in front of others and invest large amounts of money in an attempt to make big profits. However, most of them later realize that just as leverage increases profits, it can also increase losses. Therefore, in trading, survival is more important than making profits. Because only by surviving can you gradually increase your profits. Experienced traders first think about losses rather than profits and decide accordingly how much loss they can tolerate and expect accordingly. Therefore, protecting capital is the key to surviving in trading.

I think all of them just want to reduce and minimize the losses. And that's one way of protecting the capital in order for them to survive.

Someone can boast how big their profits are but behind the scene, how much is the total loss that they've got?

So, I agree to what you've said that when someone is trying to survive as they trade, it also increases their chance of profiting.

But each trader has their own perspective on how they'll become profitable but what you have said is just one of the many.

You are right, that capital protection is one of the main pillars of those who wish to survive in the market in the long term. What appears on the surface to be a successful number of traders are actually the most skillful in keeping their losses down when the trend turns against them. Not moving out of the market is not an indication that you are weak, but a brilliant move to be sure you have capital should there be an excellent opportunity.

[Mpamaegbu]

So I doubt that we would have a low risk trading that could result with double return, it would have to be something very risky. Whereas, if you aim at only 5% profit per month, which is HUGE on the long run, it still is far more likely.

I feel that will depend on one's trading capital for it to be that HUGE as you said. Take for instance, a 5% monthly profit for someone with a $1k trading account is just $50. Making $50 on a $1k trading capital in a month barely scratches the surface. I don't think anyone would be happy achieving that monthly.

This is why I try to keep it realistic, even 1-2% per month every month for over a decade would be a dream come true for me, yes some months are far better, but important thing is to average that much every month.

I dont know how realistic that will have to be, anyway; except that's on a passive income. On trading, that doesn't make any sense. Again, making that little monthly will suggest that the trader sorts their bills elsewhere, and don't rely on profit from trading. For those who're scared of taking risk, trading isn't for them; neither is this industry for them too.

[Webetcoins]

capital protection is one of the main pillars of those who wish to survive in the market in the long term. What appears on the surface to be a successful number of traders are actually the most skillful in keeping their losses down when the trend turns against them. Not moving out of the market is not an indication that you are weak, but a brilliant move to be sure you have capital should there be an excellent opportunity.

And then under that term 'capital protection' there are also lots of ways of doing it, like for example 'using money we can afford to lose', or the ones that is popular in trading is 'stop loss'.

What we deemed or see as successful are usually not genuine. Many are not even into trading at all. Apart from being skilful, they also posses other positive traits.

Trading is like a fight that offense should not always matter but also defense and then analysing our foes move or in our case here 'the market', so that we can counter them next time.

[jossiel]

I think all of them just want to reduce and minimize the losses. And that's one way of protecting the capital in order for them to survive.

Someone can boast how big their profits are but behind the scene, how much is the total loss that they've got?

So, I agree to what you've said that when someone is trying to survive as they trade, it also increases their chance of profiting.

But each trader has their own perspective on how they'll become profitable but what you have said is just one of the many.

You are right, that capital protection is one of the main pillars of those who wish to survive in the market in the long term. What appears on the surface to be a successful number of traders are actually the most skillful in keeping their losses down when the trend turns against them. Not moving out of the market is not an indication that you are weak, but a brilliant move to be sure you have capital should there be an excellent opportunity.

People need to start removing that thought about getting out of the market when they take profit as a weak decision.

It's not, that won't indicate these traders as weak when they do that. In fact, that shows on how wise they are.

Because in the first place, that's the main reason why people trade and that's to have a good exit with some profits.

[ChocolateBitcoinK]

I think all of them just want to reduce and minimize the losses. And that's one way of protecting the capital in order for them to survive.

Someone can boast how big their profits are but behind the scene, how much is the total loss that they've got?

So, I agree to what you've said that when someone is trying to survive as they trade, it also increases their chance of profiting.

But each trader has their own perspective on how they'll become profitable but what you have said is just one of the many.

You are right, that capital protection is one of the main pillars of those who wish to survive in the market in the long term. What appears on the surface to be a successful number of traders are actually the most skillful in keeping their losses down when the trend turns against them. Not moving out of the market is not an indication that you are weak, but a brilliant move to be sure you have capital should there be an excellent opportunity.

People need to start removing that thought about getting out of the market when they take profit as a weak decision.

It's not, that won't indicate these traders as weak when they do that. In fact, that shows on how wise they are.

Because in the first place, that's the main reason why people trade and that's to have a good exit with some profits.

Those who consider this to be weak are stuck in the biggest misconception, those who continue to trade so much with overconfidence, taking profits, eventually lose everything. There is no greed here, but it is necessary to trade with discipline and take profits, if you continue to trade a lot with the thought of more profits, then losses will come very quickly. Exiting the market with profits is never a sign of weakness, rather, it proves that the trader has achieved his goal and stop trading by prioritizing reality instead of greed.

[Royal Cap]

And then under that term 'capital protection' there are also lots of ways of doing it, like for example 'using money we can afford to lose', or the ones that is popular in trading is 'stop loss'.

What we deemed or see as successful are usually not genuine. Many are not even into trading at all. Apart from being skilful, they also posses other positive traits.

Trading is like a fight that offense should not always matter but also defense and then analysing our foes move or in our case here 'the market', so that we can counter them next time.

If someone is only busy protecting capital, then he may never be able to make significant profits. Surviving the market is important, but if survival is the only goal, trading can gradually become very passive. So in my opinion, capital protection is important, but adaptability is even more important. The market is always changing, so just stop loss or defensive mindset is not enough. The real defense is to diversify your portfolio before entering a trade in such a way that even a big crash in the market cannot have any impact on the entire fund. Many times successful traders do not say that they win more, but rather they know when to take risks and when to back off. So I would say this balance is actually the most difficult skill.

[LastKiss]

And then under that term 'capital protection' there are also lots of ways of doing it, like for example 'using money we can afford to lose', or the ones that is popular in trading is 'stop loss'.

What we deemed or see as successful are usually not genuine. Many are not even into trading at all. Apart from being skilful, they also posses other positive traits.

Trading is like a fight that offense should not always matter but also defense and then analysing our foes move or in our case here 'the market', so that we can counter them next time.

If someone is only busy protecting capital, then he may never be able to make significant profits. Surviving the market is important, but if survival is the only goal, trading can gradually become very passive. So in my opinion, capital protection is important, but adaptability is even more important. The market is always changing, so just stop loss or defensive mindset is not enough. The real defense is to diversify your portfolio before entering a trade in such a way that even a big crash in the market cannot have any impact on the entire fund. Many times successful traders do not say that they win more, but rather they know when to take risks and when to back off. So I would say this balance is actually the most difficult skill.

I'm taking partial profits whenever I'm up at least 1%–5% and I move my stop loss to break even because, like you said it's important to protect the capital and there are many cases where traders get front run on their take profit levels and end up getting stopped out instead. That's why it's important for me not only to know my potential risk to reward ratio but also to take partial profits along the way. Although I won't make as much as I could if the trade reaches my full take profit target, at least I can avoid getting roundtripped in volatile market conditions.

[OsaiEmma]

You don't need a better win rate, you need better trade.

Remember, Risk management is not about winning every trade, is about Surviving every loss.

instead Risk Management builds Longevity

This is the main point a lot of people miss. Risk management is there to stretch out your capital so that, when that perfect setup shows up, you won't be out of commission.

Win rate is not easy to maintain. You certainly will face losses in the market. But with a good risk management which ranges from health RRR(Risk to Reward Ratio), to minimal leveraging, good enough capital, and much more. The losses can be managed and help you survive the losses the market brings.

[Oshio-man]

How can we say that trying to make $2000 with $1000 is risk management? I know it is possible and everything is possible in this world for the sake of argument.

Some traders don't know how to apply this risk management to save their resources and to have opportunity to trade another time, if that $1k is the only fund you have, that is not risk management because if you lost the $1k what do you think will happen to you, it will make you to go back to square one again which is not the wish of any trader in the industry, even though everything is possible in this world, it doesn't mean you should encourage such new traders to embark on such risk because it can make some trader to commit suicide when they lost the capital.

[DPHOR]

How can we say that trying to make $2000 with $1000 is risk management? I know it is possible and everything is possible in this world for the sake of argument.

Some traders don't know how to apply this risk management to save their resources and to have opportunity to trade another time, if that $1k is the only fund you have, that is not risk management because if you lost the $1k what do you think will happen to you, it will make you to go back to square one again which is not the wish of any trader in the industry, even though everything is possible in this world, it doesn't mean you should encourage such new traders to embark on such risk because it can make some trader to commit suicide when they lost the capital.

To me it is a bad move using the entire $1k to trade could make such person lose everything completely. As a trader when you have such amount it either the person use 10% of that money to trade and how their performance could be and if they just lose it quickly then there is a chance for them to go study and find strategies that would help them to win for long run, before they could easily go fund back their account to trade again. Any trader who can not manage their risk properly could find it very hard to cope for a long run.

[Big Dirams]

How can we say that trying to make $2000 with $1000 is risk management? I know it is possible and everything is possible in this world for the sake of argument.

Some traders don't know how to apply this risk management to save their resources and to have opportunity to trade another time, if that $1k is the only fund you have, that is not risk management because if you lost the $1k what do you think will happen to you, it will make you to go back to square one again which is not the wish of any trader in the industry, even though everything is possible in this world, it doesn't mean you should encourage such new traders to embark on such risk because it can make some trader to commit suicide when they lost the capital.

To me it is a bad move using the entire $1k to trade could make such person lose everything completely. As a trader when you have such amount it either the person use 10% of that money to trade and how their performance could be and if they just lose it quickly then there is a chance for them to go study and find strategies that would help them to win for long run, before they could easily go fund back their account to trade again. Any trader who can not manage their risk properly could find it very hard to cope for a long run.

Risking everything on a single entry is a totally a dumb idea because why would a trader with good risk management would risk all that for just a single entry when there are many opportunities in the market so why risking an entry which can easily liquidate us and destroy our trading journey.
It is a smart idea to make more analysis and look for Proper strategies that will shows us there are many opportunities in the market other than just a single one. The market is filled with lot of opportunities so let not risk everything on a single trade. Let take things gradually and not with haste.