Risk Management Mindset

[Jegileman]

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. But we also need to be realistic, finding a $20 profit trade with $1000 is more possible than finding one $2000 trade, so pick the one which is more likely to happen and keep repeating the cycle for a hundred times, it looks boring but it is kind of easy money compared to finding the most difficult trade of your life.

This is some kind of get rich quick approach that a trader suppose to desist from. The market is not a place where you can get to flip your account as you want. Flipping an account is not something impossible but the probability of it happening is even very slight and one should not risk taking it. Getting a 1% profit from your account daily while still having a lot more to trade from is a good progress. Trading is very risky and we should approach it with a clear mind and not just assumption it high expectations of getting rich quickly from it.

[Jatiluhung]

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. But we also need to be realistic, finding a $20 profit trade with $1000 is more possible than finding one $2000 trade, so pick the one which is more likely to happen and keep repeating the cycle for a hundred times, it looks boring but it is kind of easy money compared to finding the most difficult trade of your life.

This is some kind of get rich quick approach that a trader suppose to desist from. The market is not a place where you can get to flip your account as you want. Flipping an account is not something impossible but the probability of it happening is even very slight and one should not risk taking it. Getting a 1% profit from your account daily while still having a lot more to trade from is a good progress. Trading is very risky and we should approach it with a clear mind and not just assumption it high expectations of getting rich quickly from it.

Using risk management also means limiting our loss ratio to a level we can afford. Consequently, our potential profits will inevitably be limited as well. Aiming for a profit of a few percent per day is the most realistic approach. If someone expects large profits in a faster way, then I think they aren’t using risk management properly. Because that would just look like aggressive trading, which happens when someone becomes too bold in taking high risks. Usually, they trade in the futures market or enter newly listed tokens on DEXs. Yes, doubling profits is very possible in a short time there, but so is the risk of incurring massive losses in a short time as well. And clearly, that is something that must be avoided by someone who practices proper risk management and wants to trade calmly without getting too stressed.

[Findingnemo]

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. But we also need to be realistic, finding a $20 profit trade with $1000 is more possible than finding one $2000 trade, so pick the one which is more likely to happen and keep repeating the cycle for a hundred times, it looks boring but it is kind of easy money compared to finding the most difficult trade of your life.

This is some kind of get rich quick approach that a trader suppose to desist from. The market is not a place where you can get to flip your account as you want. Flipping an account is not something impossible but the probability of it happening is even very slight and one should not risk taking it. Getting a 1% profit from your account daily while still having a lot more to trade from is a good progress. Trading is very risky and we should approach it with a clear mind and not just assumption it high expectations of getting rich quickly from it.

I am not even claiming that 1% profits from every trade or every day is possible but it is highly possible when we compare it with a 200% profit trade, which is why I called reducing the risk factors is the risk management instead of focusing on the potential profits.

[Hamza2424]

This is just the reason traders are losing. You have $1000 to trade, but you want to use it to have PnL of +1000. That is when the person will think of high leverage when he noticed it is not possible with 1x leverage. And that will be the reason the person may think of shit coins that could be the reason he will lose.

Yep, we should not target 2x when trading. We just have to target more profit than the potential loss on the line. Like if we are risking $1000 for a $200 profit as take profit 1, but our SL is $100, that means we are risking less and the potential for making profit is higher, so this is a good trade. As far as I think, this is exactly what OP wanted to say but used the wrong numbers instead.

Although the chart used is good, it could be better.

Well bro, to add more to this, we should also not look at every trade this way because this could reduce the risk, but if we lose 10 trades in a row, that means we lose our capital. Therefore, we should risk less capital and change our strategy when we can according to the market movement.

[I_Anime]

Only trade when you have 1:2 risk to rewards ratio. If you risk 1000$ your target must be at least 2000$



Then if your target is below, Just skip the trade



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

Exactly sticking to your strategy is another way of improving your risk management. Not trading 1:1 risk set up is part of your strategy and it takes discipline  to keep to it that’s why it play a very vital role when come to trading .

Having the right risk management mindset is so golden that it will give you one of the best edge in your trading career, that’s why some trader are skillful but are not successful or profitable yet because they have the wrong trading psychology.

[JeffBrad12]

I am not even claiming that 1% profits from every trade or every day is possible but it is highly possible when we compare it with a 200% profit trade, which is why I called reducing the risk factors is the risk management instead of focusing on the potential profits.

Tbh, I think he is saying that hypothetically just to demonstrate risk management but the idea of making 200% profit in a trade in itself is ridiculous unless you are using high leverage, like you said.
200% increase is rare to come by, even profiting off scalping with 2-5% profit is already good enough and more common than 200% profit. Showing these potential profits at the range of 100-200% gain feels like fake trading guru vibes.

[jcojci]

That is difficult to have target 1:2 to rewards ratio even if you use big funds to trade. That will not works if the market not moves good and difficult to analyze. We should have rational target to achieve so we will not feels difficult.

Risk management will behind on your trade so you must know how to manage the risk not becoming big. You can set up the target but not too high because the market can moves towards to any direction. Better trade means you need to profits and prevent the big lost so you can use that mindset but you can't force people to use the same as you.

[EarnOnVictor]

Only trade when you have 1:2 risk to rewards ratio. If you risk 1000$ your target must be at least 2000$
Then if your target is below, Just skip the trade

As must as the the risk to reward ratio of 1:2 and above are good, you can't still downgrade 1 reasonably lower ones, as the win rate of the strategy matters. The risk to reward ratio is just one factor to consider. I've seen strategies with 1:1.5 working fine, and I've seen strategies with 1:2 struggling to yield good profits. Do you know why? It's because of the negligence of the strategy itself, despite being a huge factor too.

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

As much as I don't want to sound antagonising, this is not accurate again. How do you define a better trade away from a better with rate? As long as you don't foreknow the outcome of the market, a better win rate is the hope of every trader. Even if you are only trading the "sure" setups, is it still not the good win rate you are aiming for?

Maybe you should say instead: "You don't need a better win rate, you need a better risk management."

[The Cryptovator]

I know we can't win every trade, but I regret to say sometimes even I fail to manage the risk. So risk management is a very important part of trading. During the last bull run, I made a decent amount of money from the trading, but during the market fall, I failed to manage the risk. Because I had used stop losses but later cancelled them, it did lead to a huge loss for me.

So, I learned from this experience, but it turned out to be a costly lesson. If I had managed the risk and not cancelled the stop loss, then I would have triple the coins now in my wallet. Because if I sell during the bull and wait for the dump, then I can buy 3X coins now. I will use this strategy in the future, but the problem is that not all strategies are applicable in every situation.

[tbct_mt2]

I know we can't win every trade, but I regret to say sometimes even I fail to manage the risk. So risk management is a very important part of trading. During the last bull run, I made a decent amount of money from the trading, but during the market fall, I failed to manage the risk. Because I had used stop losses but later cancelled them, it did lead to a huge loss for me.

Using stop loss is important, or another trading order stop limit order is very important for traders too. It protects people and their trading positions from extreme big changes in the market, and it can help them reducing loss without emotional effects.

Using a stop loss or stop limit order is good, but it's not enough if you are online at the time of market big change and decide to cancel the order. It can lead to bigger loss and even very severe loss, and the worst consequence is you don't stay inactive after cancelling the order. Perhaps you cancel it to hope for a recovery but if market drops more, you will panic and sell with bigger loss.

One of the best weapons in trading [Guide].

[Nrcewker]

Trading without risk management is like gambling. If you value your hard-earned money, then proper risk management can save you from going bankrupt. The chart examples in the OP are good, but people need to do more than just that. They need to understand that trading takes time and that results are not always instant. You have to be patient and learn from the markets.

If you do leverage trading, risk management can be especially beneficial, as it helps you control losses and manage your overall risk exposure. In addition, always trade with a stop-loss order. If your technical analysis fails, these two tools can help protect your capital and reduce potential losses.

[Bushdark]

That is difficult to have target 1:2 to rewards ratio even if you use big funds to trade. That will not works if the market not moves good and difficult to analyze. We should have rational target to achieve so we will not feels difficult.

Risk management will behind on your trade so you must know how to manage the risk not becoming big. You can set up the target but not too high because the market can moves towards to any direction. Better trade means you need to profits and prevent the big lost so you can use that mindset but you can't force people to use the same as you.

Risk management is an important topic for traders that want to be successful in the market trading different coins to make money. Traders that are using non effective risks management would have a problem making profits from the market.
The bear market is one of the most difficult market to trade and traders need to upgrade strategy when trading since any news can come up that could change the illustration of the market and when trading the opposite direction of the market, this will become a problem that could yield to serious loses. A more simple and comprehensive risk management will be fine for beginners traders.

[ZAINmalik75]

Tbh, I think he is saying that hypothetically just to demonstrate risk management but the idea of making 200% profit in a trade in itself is ridiculous unless you are using high leverage, like you said.
200% increase is rare to come by, even profiting off scalping with 2-5% profit is already good enough and more common than 200% profit. Showing these potential profits at the range of 100-200% gain feels like fake trading guru vibes.

I can't help but agree with you on this, because I'm also against having very high profit targets in trading because it's not an investment where you plan to take profit only when you have gotten 2x or more, but it's trading, and you can't expect to get 2x from your trades every time, it might be possible only occassionally when the market is heading straight up or down and you make a trade perfectly on time and manage to catch the pump or the dump, but you can't have such high expectations all the time, and I think that's too risky.

Even if someone is using stop-loss with their trades with such a target, they will mostly get their stop-loss hit before they can actually hit the take profit trigger, which means they will mostly lose money and by the time one of their trades successfully earns 200%, they must have already lost more money than they are going to make on that trade, so I don't think it's a very good strategy to go with.

[Dr.Bitcoin_Strange]

Well, that's not the maths for me, it doesn't have to be that you must double your margin with just one trade, that's even when you risk busting your account easily become by the time you will be waiting for the full TP, then market can easily reverse on you. I think the best way you do the maths is to concluded on the amount of lose your are willing to accept for a trade and also the profit you are targeting, for example, I'm taking a trade with $100 and my expected profit is $20 while I will close the trade once I run into a lose of up to $8, that's how some people do it.

[Rengga Jati]

This is just the reason traders are losing. You have $1000 to trade, but you want to use it to have PnL of +1000. That is when the person will think of high leverage when he noticed it is not possible with 1x leverage. And that will be the reason the person may think of shit coins that could be the reason he will lose.

In fact, beginners often use high leverage to trade because they hope to quickly gain significant profits. They think trading is all about setting positions, setting high leverage, and taking profits. They may not even use risk management or go into more detail. They only think about the profits, never the risks. This is what often leads to losing all-ins among beginners.

[Synchronice]

Only trade when you have 1:2 risk to rewards ratio. If you risk 1000$ your target must be at least 2000$

Is this really a good advice? I'll talk from the perspective of my psychology, so I don't know how others think about this. My mindset is that if I have $2000 totally but I trade only with $1000, I'll try to be more risky because I have another $1000 saved and I also want some good profit, so I think that my mind will allow me to be riskier than usual but if I trade with $2000, I'll most likely be careful with my trading because $2000 leaves more space for profit with less % aim, i.e. if I aim to earn $200 for example, I only need 10% profit with $2000 budget but I need 20% profit with $1000 budget.

[Cgrexp]

This is just the reason traders are losing. You have $1000 to trade, but you want to use it to have PnL of +1000. That is when the person will think of high leverage when he noticed it is not possible with 1x leverage. And that will be the reason the person may think of shit coins that could be the reason he will lose.

In fact, beginners often use high leverage to trade because they hope to quickly gain significant profits. They think trading is all about setting positions, setting high leverage, and taking profits. They may not even use risk management or go into more detail. They only think about the profits, never the risks. This is what often leads to losing all-ins among beginners.

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.

[pusaka]

Only trade when you have 1:2 risk to rewards ratio. If you risk 1000$ your target must be at least 2000$

Is this really a good advice? I'll talk from the perspective of my psychology, so I don't know how others think about this. My mindset is that if I have $2000 totally but I trade only with $1000, I'll try to be more risky because I have another $1000 saved and I also want some good profit, so I think that my mind will allow me to be riskier than usual but if I trade with $2000, I'll most likely be careful with my trading because $2000 leaves more space for profit with less % aim, i.e. if I aim to earn $200 for example, I only need 10% profit with $2000 budget but I need 20% profit with $1000 budget.

I prefer the second approach, because to me, targeting the profit we want to make is less risky than targeting a larger profit based on our capital. Because the level of leverage also plays here, so we will take what kind of risk. Indeed, higher leverage will make us able to get profits when our predictions are correct, but the risk is also large.

So risk management must also consider many factors. We must also analyze how strong we can withstand losses when we trade. Because usually people forget this, they focus on profits but they forget the limit they can withstand and can accept losses.

[tygeade]

Only trade when you have 1:2 risk to rewards ratio. If you risk 1000$ your target must be at least 2000$

Is this really a good advice? I'll talk from the perspective of my psychology, so I don't know how others think about this. My mindset is that if I have $2000 totally but I trade only with $1000, I'll try to be more risky because I have another $1000 saved and I also want some good profit, so I think that my mind will allow me to be riskier than usual but if I trade with $2000, I'll most likely be careful with my trading because $2000 leaves more space for profit with less % aim, i.e. if I aim to earn $200 for example, I only need 10% profit with $2000 budget but I need 20% profit with $1000 budget.

Yeah, it is not "perfect" advise. Don't get me wrong, if you do that, and it works, then great I am not against it and lower the risk the higher reward ratio should be hoped for and looked for. However, I also know that if you want to double your money, low risk is usually not there at all. It happens once or twice every few years, and not even once a year.

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. 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.

[jossiel]

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.