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.

[dansus021]

The most trader in website or youtube is 1.2 and pretty much this is most suitable in most cases. But personally im using local support and resistance zone for take profit and stop loss zone.

Or you can combine between snr and fibonnaci retracment 0.5 0.678 mostly works everytime, but one thing for sure know your riskk manage the mindset

[bitgolden]

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.

Small profits are indeed better than no profits but sometimes it's worth taking the risk. Maybe what you can do is secure the initial investment and then risk the profits to gain further profits.

I'm more of a slow or long-term trader who prefers to buy and then wait for the right time to sell. So, for me, I mustn't sell at 1-2% profit, otherwise it's not worth the wait, which is sometimes several months.

But maybe that small profits option is viable for traders who make several trades a day and prefer to accumulate the smaller profits into a bigger one.

[Rengga Jati]

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.

Basically, high leverage means high profits, many times greater. However, they must also understand that the risks are also significantly higher. Well, as you said, newbies sometimes only focus on the profits, but ignore the risk probability. This is something to avoid. It's better to learn first, understand first, then decide what kind of trading we want. We shouldn't just imitate others who have dared to take high-leverage risks, while on the other hand, we are still completely new. This is completely inappropriate for the situation.

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

Of course, the hope of trading is always to gain profits, always achieving high profits. However, the reality is, it's not that easy. Trading carries high risks, so there's always the risk of losing money, whether continuously or quickly recouping profits and covering losses.

[jossiel]

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.

Definitely, every trader needs to do it with discipline or else they're going to lose everything that they've gained from the market.

Any kind of trading strategy they have used to gain and win their trades will be nothing if they lose everything in the long run.

It became a trend that whoever started that thought for the profit takers as weak people might have missed theirs to take.

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

Of course, the hope of trading is always to gain profits, always achieving high profits. However, the reality is, it's not that easy. Trading carries high risks, so there's always the risk of losing money, whether continuously or quickly recouping profits and covering losses.

Not easy and I agree and that's why whoever takes profit is a pride in themselves that they've made it and not to humiliate them as weak.

[Achalugo BTC]

Small profits are indeed better than no profits but sometimes it's worth taking the risk. Maybe what you can do is secure the initial investment and then risk the profits to gain further profits.

I'm more of a slow or long-term trader who prefers to buy and then wait for the right time to sell. So, for me, I mustn't sell at 1-2% profit, otherwise it's not worth the wait, which is sometimes several months.

But maybe that small profits option is viable for traders who make several trades a day and prefer to accumulate the smaller profits into a bigger one.

That's how things should be when one its trading, it doesn't necessarily mean that one must acquire big profits before they can get things right, sometimes small wins matters alot too, because risking your funds without having anything in return might just ruined your mood and this might also make them to trade wrongly, that is why its good for one to risk what they can lose and adhere to the rules because if they ignore the risks involved, so its essential for one to have an exit plan, that is to say to know when its the right time to sell and to buy, in order for them not to make mistakes or take any wrong step that might terminate their target.

[Cgrexp]

Small profits are indeed better than no profits but sometimes it's worth taking the risk. Maybe what you can do is secure the initial investment and then risk the profits to gain further profits.

I'm more of a slow or long-term trader who prefers to buy and then wait for the right time to sell. So, for me, I mustn't sell at 1-2% profit, otherwise it's not worth the wait, which is sometimes several months.

But maybe that small profits option is viable for traders who make several trades a day and prefer to accumulate the smaller profits into a bigger one.

That's how things should be when one its trading, it doesn't necessarily mean that one must acquire big profits before they can get things right, sometimes small wins matters alot too, because risking your funds without having anything in return might just ruined your mood and this might also make them to trade wrongly, that is why its good for one to risk what they can lose and adhere to the rules because if they ignore the risks involved, so its essential for one to have an exit plan, that is to say to know when its the right time to sell and to buy, in order for them not to make mistakes or take any wrong step that might terminate their target.

Success in trading comes through consistency and controlling risk and surviving in the long term. So, it is more important to make small profits and protect capital than to take risks for big profits. Because to win, you have to survive. In addition, an exit plan is important because many people spend time looking for good entries. But they do not have any plan for when to exit. Due to which, falling leads to big losses. So, to survive, you have to follow a method that will bring positive results in the long term. And the strategy will be effective in the long term only when risk management and planning are taken correctly.

[SquallLeonhart]

This totally depends on the trading interval. For short term, I might say 1:2 ratio might work but for mid to long range, I prefer 1:5 or greater ratios. According to my experience, I would hit at least 3 stop loss before generating profit. So 1:5 ratio helps me a lot in balancing the profit ratios.

Yes, I do accept the fact that hitting 3 stop loss every 5 trades is not what most of us are expecting here. I consider myself as a learned and making mistakes is just a part of my learning so I do not really worry about it at least until I make those 2 profits out of 5 trades. Initially, I used to make profit in only one out of ten trades. I think, I am doing much better now and would learn a lot more things as we advance in future. I can only make profits now because of a proper risk management strategy in place.

[EarnOnVictor]

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.

Reducing your risk doesn't still mean your risk to reward ratio can't be improved upon to even better the side of the profits. I've noticed that many people do not understand what the risk to reward ratio is and how it comes in play and how important it is in trading. If you like, use the lowest possible risk, a better risk to reward ratio can still be established in it if:

1.Your trading strategy is very good, and 2. It is such that permits a lower risk and maximises profit potential. I'm using some of these strategies that permits such combination, like trendline, Fibonacci and even a simple price action approach. If well tailored, they will afford you a very low loss potential in every trade, which will automatically raise the opportunity to have a higher risk to reward setup.

[Achalugo BTC]

Success in trading comes through consistency and controlling risk and surviving in the long term. So, it is more important to make small profits and protect capital than to take risks for big profits. Because to win, you have to survive. In addition, an exit plan is important because many people spend time looking for good entries. But they do not have any plan for when to exit. Due to which, falling leads to big losses. So, to survive, you have to follow a method that will bring positive results in the long term. And the strategy will be effective in the long term only when risk management and planning are taken correctly.

Survival first is the real game before thinking about profit, consistency is very important, not only in trading but in other aspects of life, always pushing further even when it seems like the market is in your favour or not, you don't give up easily like the way others do, which you know that you surely get there, and also have the awareness of the risks involved, helps one to be able to manage it well by ensuring your capital its safe and most importantly, the exit plan as you said, being able to stop or control yourself, knowing fully well that you will try again in the next day, this helps one to build up their discipline habits, as its good for them in this trade.