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Risk Management

Are you prepared to lose? (and what to do if you are not)A new trader, let's call her Sarah, has just started trading in the crypto market. She has been reading articles and watching videos about trading, but hasn't taken the time to develop a solid trading plan, or to gain a good understanding of the markets and underlying assets she is trading. Sarah sees bitcoin's value is going up, she doesn't do any further research or analysis, she doesn't set a stop loss or take profit level, she just buys bitcoin, with the expectation that she will make a quick profit. Unfortunately, the value of bitcoin doesn't perform as well as Sarah had hoped, and instead of going up, it starts to go down. Sarah gets anxious and starts checking the bitcoin's value frequently, and since she didn't set a stop loss, she watches as her position continues to lose value. Eventually, the bitcoin loses so much value that Sarah is forced to sell it at a large loss. Feeling disheartened, Sarah starts to second-guess herself and her abilities as a trader. She didn't have a plan or a strategy, didn't manage her risk properly, and didn't have a clear understanding of the markets and the underlying asset. She didn't prepare for the possibility of losses and didn't have a plan for exiting losing positions. 😭😖😞Unfortunately, the story above is very common in trading, so how can we prepare for losing trades? ☝🏽 Preparing for the possibility of losses is an important part of risk management and can help traders to minimize the impact of losses on their trading capital. Some ways to prepare for the possibility of losses include: 1️⃣ Setting realistic trading goals: Traders should set realistic goals that take into account the inherent risks of trading and the potential for losses. By setting realistic goals, traders will be better prepared to handle losses when they do occur. 2️⃣ Establishing a risk management plan: This includes determining the appropriate size of each trade, placing stop-loss orders, and evaluating the potential reward relative to the potential risk. This can help to limit potential losses and protect trading capital. 3️⃣ Maintaining a proper risk-reward ratio: This means that the potential reward of a trade should be greater than the potential loss. This helps ensure that the potential reward justifies the potential risk. 4️⃣ Diversifying the portfolio: By spreading capital across a variety of different markets and instruments, traders can reduce overall portfolio risk and minimize the impact of losses in any one market or instrument. 5️⃣ Building a trading cushion: This means keeping a reserve of capital that can be used to absorb losses and maintain the trader's ability to continue trading. This cushion should be large enough to withstand a series of losses, but not so large that it affects the trader's ability to trade effectively. 6️⃣ Emotionally preparing for losses: It's important to remember that losses are a normal part of trading and to not let them affect you emotionally. By preparing emotionally for the possibility of losses, traders will be better able to handle them when they occur. 7️⃣ Have a plan for exiting losing positions: Having a plan for exiting losing positions will help to minimize the impact of losses on the portfolio. This could include setting a stop loss or taking profits at predetermined targets. ⚠️ Remember, it's important to accept that losses are a normal part of trading and that they are not a reflection of the trader's ability. By preparing for the possibility of losses and implementing a solid risk management plan, traders can minimize the impact of losses and increase the chances of long-term success. I hope this has been informative to you, and if it was, please leave a like or a comment below. 👇🏽👇🏽👇🏽 Thanks for your visit!
BITSTAMP:BTCUSDEducation
by Nico.Muselle
34
Managing Risk Using Probabilities 3 In part 2 of this series, we discussed the probability of a coin flip and how the odds that you land on heads "x" number of times in a row significantly decreases each time the coin is flipped. Therefore, it is important to understand the difference between "the probability the chart goes up or down" and "the probability that you (the trader) find yourself in a winning trade." The brings me to my next point of gathering your data. There is a difference between gathering data to calculate the probability an asset will rise or fall versus gathering data on a specific trade set-up and determining whether or not it will win or lose. Backtesting and forward testing are both excellent methods to calculate probabilities. In my honest opionion, backtest at least 100 trades in order to best calculate probability. Ask yourself if you are okay with losing more than 3 times in a row. If your set up loses more than 4 times in a row, it is very likely your odds of being in a losing trade are worse. Please take the time to think and meditate on this matter. If there are no questions concerning this, I may begin to go into details of my own personal trading set ups on the next article. Be blessed! Handy
BYBIT:BTCUSD.PEducation
by DelusionalRams8
2
Learn Why Do You Need a Stop Loss 🟥 Hey traders, Talking to many struggling traders from different parts of the world, I realized that the majority constantly makes the same mistake: they do not set a stop loss. Asking for the reason why they do that, the common answer is that these traders consider the manual position closing to be safer, implying that if the market goes in the opposite direction, they will be able to much better track the exact moment to cut loss. In this article, we will discuss why it is crucially important to set a stop loss and why it is the number one element of your trading position. First of all, let's discuss what is a stop loss. By a stop loss, we mean a certain price level where we close our trading position in loss. In comparison to a manual closing, the stop loss should be set at the exact moment when the order is executed. Stop loss allows us limiting the risks in case of unfavorable movements. On the chart above, I have illustrated 2 similar negative scenarios: 1 with a stop loss being placed and one without. In the example on the left, stop loss helped to prevent the excessive risk, cutting the loss at the beginning of a bearish wave. With the manual closing, however, traders usually hold the negative positions much longer, praying for a reversal. Holding a losing trade, emotions intervene. Greed and fear usually spoil the reasoning, causing irrational decisions. Following such a strategy, the total loss of the second scenario is 5 times bigger than the total loss with a placed stop loss order. Stop loss defines the point where you become wrong in your predictions. Planning your trade, you should know in advance such a point and cut your loss once it is reached. Never trade without a stop loss. ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
OANDA:XAUUSDEducation
by VasilyTrader
9
Is it your strategy or you???What is your strategy? If asked, could you explain it to one of your friends or family members? More importantly, does it make sense? Is it clear? Teaching or Sharing your thoughts & methods leads to a deeper understanding of the content. If nothing else, speak aloud and hear your reasoning out of your own mouth before taking a trade. My current strategy is to take a defined structure from Swing High to Swing Low or Swing Low to Swing High and use it as the basis for my analysis. Naturally, the structure will indicate a trend, and I would need to decide if that trend is in alignment with or contrary to the broader market. Either is fine, but this distinction is essential when assessing targets and risk. I have to constantly remind myself that I don't know what the market will do. Since I don't know what the market will do, it follows that I should be open to changing my mind and also safeguarding against my ignorance. With this being said and firmly in mind, there are three levels that I like to pay attention to. They are: Breakouts of previously established key levels. The .618 Retracement & 1.618 Extension (current and previous structures) Between the .786 & .886 Simple enough. I'm sure that your strategy for entry can be explained in layman's terms as well. The issue typically doesn't lie in the analysis it lies in the trader's ability to follow said analysis and follow it consistently. Does this sound relatable? You spend hours or maybe even days conducting your analysis, waiting for the market to make its move and give you some indication of what might happen in the near future. As time passes, things seem to become more clear, and you see your opportunity coming. Sure there are a few unexpected movements that happen along the way but that's just how markets move. Price approaches your entry but not yet. Hell, it may not actually reach the level at which you established as a good entry. So you enter early and let the candles fall where they may. If you have fixed stops, now your levels are thrown off. If you don't, then any concept of risk that you had in your mind has been altered and you now bear the task of making mental adjustments to compensate for a completely different trade. Because that's exactly what it is, a completely different trade, with new numbers, figures, distances, R&R ratios, and new implications of risk. The market moves in your favor, possibly even nearing your predetermined target. If it's a fixed number of pips, then that number has changed. If it was a fixed target then your projected profits have changed. This may not seem like a big deal but for beginning traders who are establishing their system, this means everything. Every decision you make against yourself has future implications on your equity curve, but also on your confidence and understanding of what you are doing in the market. In order to be consistent and profitable in the market we must learn to trade in a consistent manner with a strategy that will prove to be profitable over time. The market continues to move but it has taken a sudden turn against you, whatever profits you had are quickly erased and price action now edges toward your stop loss. You've been stopped out only to learn that if you had been patient at entry and kept your original strategy in place, you wouldn't have been stopped out, and price action would have ultimately gone in your favor reaching your target. The point of all this is to illustrate that we unconsciously make changes to our strategies as we are deploying them. These changes have a compounding effect on the outcome of our trades. Even if you are made a winner by these changes you've made, you will have reinforced a bad habit that will undoubtedly lead to many losses in the future. There is power in understanding the unique set of tendencies and preferences that make you the type of trader you are. If you continue to ignore this, you will rightfully take your place amongst the other 90% of failing traders. When you start to pay attention to your own uniqueness and figure out what concepts, ideas, strategies, tools, and methods resonate with you, then you will be on your way to developing a system that you can trade consistently. Losing is a part of the game. You may as well lose in a manner that produces feedback that can be learned from. Are you losing because your strategy needs adjusting or are you losing because your psychology needs adjusting? It should be stated that any given trade, from start to finish, can be, and typically is, more nuanced than what I've just described. Its simplicity should not overshadow its intent. The chart attached to this post shows that there are multiple opportunities for entry for mine and, quite possibly, your strategy. All a trader needs to do is be patient and allow the market to tell you what it is doing. Along with entries are maintenance and exits. Targets are just as important as entries if not more so. Your unique perspective as a trader will heavily impact the decisions you make in all three phases of trading. Levels of Development LLC is providing this material for this site and any other related sources (including newsletters, blog post, videos, social media and other communications) for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and may not represent specific trades or transactions that we have conducted. In fact, we may use examples that are different or the opposite of transactions we have conducted or positions we hold. All investing and trading in the securities market involves risk. Any decisions to place trades in the financial markets, including trading in stock or options or other financial instruments, is a personal decision that should only be made after thorough research, including a personal risk and financial assessment, and the engagement of professional assistance to the extend you believe necessary.
BLACKBULL:US30Education
by LevelsArchitect
Sizing & how to manage riskThe easiest part, if everything's perfect you just trade as much as the market allows before the diminishing returns hit hard. However usually everything is not perfect at the beginning, so continue reading. Logically, in order to operate successfully & continuously (you can't market make much you if loose money aye?), your equity chart should represent a smooth movement from down left to the top right corner. What factors affect an equity chart? 1) Market activity itself; 2) An operation principle (strategy/system); 3) An operator(s). So our potential sizing formula/algorithm should, lol, contain these 3 factors. Makes sense? 1) If market activity is too narrow we increase size, if market activity is too wide we decrease size, otherwise if its normal we don't change anything; 2) After a systemic loss we decrease size, after a systemic profit we increase size, otherwise after a +- breakeven we don't change anything; 3) If there's real confidence about what's coming you increase size, if there are doubts you decrease size, otherwise you don't change anything. Number 3 needs a lil clarification, I didn't say "you're confident/have doubts", I said "there's confidence & there are doubts". It's not only you and quality of your operation, what you also need to feel is whether all of us, as the collective, whether the market itself is confident. And there you can use all the available info, all the other assets, all the non-market data. Understand that we are all the market, you're part of it when you trade. Every1 looks at the same data. The Collective. The Feedback loop. Ok, so how to increase/decrease exactly? First you need to calculate the maximum size. 1) Come up with the maximum tolerated loss in money for one trade (more on that later); 2) Look at the chart and find the maximum distance between the entry & exit-at-loss points; 3) Find out the maximum size that won't allow you to loose more than max tolerated loss in case of passing the distance you've just found out. These numbers should be reevaluated when there's a change. Don't forget that a change can be seasonal, just like volatility on ES futures changes after US open. Imagine you ended up with 70 lots. Divide it by 7 equal chunks. Why 7? Because of number of factors, we had three, 3*2 + 1. So now one chunk is 10 lots. One decrease/increase = 10 lots. Then you start trading at 4 chunks (40 lots) (3 + 1) (this way you got more freedom, you can both increase and decrease after the first trade). Then you just and increase/decrease according to the plan. For example, you made a profitable trade at 4 chunks, and the next level is very tight, so you have 2 systemic increases, so you increase by 2 chunks (20 lots). If you hit zero chunks you make a imaginary trades and then come back to the real account when your size becomes one chunk, if you hit 7 chunks you don't go higher (maybe couple of 8 chunks trades might make sense tho). You're free to fine tune this adjustments live, you can eg see a serious vola increase and decide to decrease by 13-16 contracts instead of 10. Calculating these things precisely won't magically turn a loosing operation into a profitable one, but will make you focus on the wrong thing & steal your energy. Don't calculate, trust yourself & let your brain approximate and feel da thing. Let's come back to the maximum tolerated loss in money. Making it 1% or 2% or 37565476% of deposit doesn't make any sense. First of all, a deposit can be financed externally, with a credit line, with a prop shop etc. You deposit should never be touched, only the risk capital above this deposit. Second, what you care about 4 real is how much risk capital do you have. For example let's say $10k, that's actually a good amount of money. Third you divide the risk capital by 7, and end up with max tolerated loss in money for one trade. No, consecutive loss streaks have nothing to do with coins & binomial distributions, so number 7 is not worse, but better cuz it's simpler. I think 4-5 consecutive losses are "OK", but 10 is too many. P.S.: if you've lost you risk capital/thing ain't going, you just stop, evaluate, fix the problems, test on simulator & start fixing another risk capital, and go again, until the victory!
CME_MINI:ES1!Education
by gorx1
Why do you need trading plan? If you make a mistake while trading on the market, you will be punished very quickly. The market doesn't like mistakes or carelessness, so the price will be a minus from your DEPO. This is just how things work. Because of this, planning is an important part of successful trading and not just a feature of an option that doesn't help you reach your goals. Today, we'll talk about what a trading plan should look like and lay out a clear set of rules that a trader can rely on in his work, no matter what the market is like, how long the investments are, or how much money they have to invest. If you don't have a plan, you're setting yourself up to fail. Remember this simple rule and stop trading based on how you feel. The market is not the place to make hasty decisions. If you have a clear trading plan that includes all possible ways to respond to changes in the market, you won't doubt the rightness of your trading decisions, and you'll be much less likely to make emotional trades that hurt your trading account. A trading plan and a trading diary will help you become a more disciplined trader and use your time, money, and nerve cells more wisely. In trading, what is a trading plan? If a trader doesn't have a plan for how to trade, he or she is likely to lose money in the market over time. As a broker, I have seen dozens of examples of this rule being true. This was also clear when I opened my first trading accounts. Most traders who consistently lose money on the financial markets do not have a trading plan. They open and close trades on a whim, or if they do have a plan, they ignore it when it would be best to follow it. Keep in mind that one of the hardest things about this kind of business is to stick to a trading plan. Just ignoring it once is enough to erase the trading results from the last few weeks or months. Trading is based on discipline, but it won't make sense if you don't have a clear plan of what can and can't be done. In trading, what is a trading plan? There must be at least five parts to a trading plan. Also, each of them could be a possible answer to the question: Can you trade on the market right now? Which way should you trade? (if it's a directed trade) How to figure out the right time to enter the market? How to define the goal and limit the risks? How to figure out the best size for a position? This is the "skeleton" of a trading plan. Each part needs to be written in detail on its own, based on the trading method, risk tolerance, and details of the markets being traded. Not every part of a trading plan is as important as the other parts. Some of them need to be changed to fit your trading style (Points 1, 2, and 3),while others should never be ignored or changed in a big way, or trading on this account will end very quickly and tragically (Points 4 and 5). To sum up what has been said, the following can be said: In the trading plan, you should list all the ways you could react to a change in the market. If this happens, you won't have to worry about "force majeure" anymore. Sharp market movements and losing trades will definitely happen, but the risk of negative trends will be taken into account in the trading plan and will not be able to cause a trading account default. Most of the time, the market is just like any other place. And if a trader loses money because the market went up or down by 5–10%, the problem is probably with the trader's plan and the fact that he or she didn't follow money and risk management rules, not because a Fed official said something. The most important thing for new traders is to learn how to work with a trading plan and risks. They shouldn't think about how easy it is to get into the market, how many Xs they can have, or how carefree their life could be. You can only stay in the market and start to fully grow and develop as a trader if you stop making rash decisions that cost you your deposit. Hope you enjoyed the content I created, You can support with your likes and comments this idea so more people can watch! ✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes. * Look at my ideas about interesting altcoins in the related section down below ↓ * For more ideas please hit "Like" and "Follow"!
BITSTAMP:BTCUSDEducation
by Crypto4light
DON'T TRADE ON HOLIDAYS | 4 Crucial Reasons Explained In this educational article, we will discuss why is it recommendable not to trade during the holidays season. 🏦 The main source of problems comes from the fact that the big market players like banks, hedge funds and investing firms are absent. Similarly to ordinary people, bankers and investors prefer to spend the holidays with their relatives and friends instead of staring at charts on Christmas Eve. But how does it affect the market? Big players are the main source of the market liquidity. The liquidity itself is the measure to which an asset can be quickly bought or sold in the market at a price of its quotes. Therefore, when the big players are missing, the market liquidity drops. 1️⃣ That fact instantly reflects in the market spreads. They become substantially bigger, directly increasing the costs of each trade and making it problematic to open a position at a desired price. 2️⃣ Secondly, low liquidity leads to a decrease in volatility. The market becomes weak and indecisive. As traders, we make the money on market moves. Our goal is to catch a bullish or a bearish wave. Their absence deprives us of profits or, at least, dramatically decreases them. 3️⃣ Thirdly, when the liquidity is low, even small market participants can move the market. It dramatically increases the probabilities of false signals. Relatively low trading volumes may manipulate the market, substantially decreasing the efficiency of technical and fundamental analysis. 4️⃣ The increased costs of trading, low volatility and manipulations should have convinced you to stay from charts during the holidays season. However, the main reason to not trade on holidays is much simpler. Holidays give you an opportunity to stay with your family, to take a break, to recharge and relax. Even a part-time trading is very exhausting and requires a constant attention. Let yourself be distracted and return after holidays. I wish you a great holidays season, traders! ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
OANDA:XAUUSDEducation
by VasilyTrader
17
The Importance of a Trading PlanIntroduction One of the most overlooked parts of trading is the simple act of having a plan. Having a well-defined trading plan is crucial for traders looking to improve their chances of success. A trading plan helps traders make informed and disciplined decisions and can serve as a roadmap for navigating the market. A trading plan can also help traders stay focused and avoid making impulsive or emotional decisions, which can be detrimental to trading performance. Defining your trading goals and risk tolerance Before developing a trading plan, it's important to define your trading goals and determine your risk tolerance. Setting clear and realistic trading goals can help you stay focused and motivated while understanding your risk tolerance can help you make decisions that align with your financial resources and risk appetite. For example, if you have a low-risk tolerance, you may choose to focus on more conservative trading strategies that aim to generate steady, consistent returns rather than styles that aim for big returns with high risk. Identifying your trading style There are many different types of trading styles, each with its own unique characteristics and potential benefits. Some common types of trading styles include day trading, swing trading, and news following. Identifying the trading style that aligns with your goals, risk tolerance, and personality can help you develop a trading plan that is suited to your needs and preferences. Developing your trading plan Your trading plan is a set of rules or guidelines that define how you will approach the market. Components of a trading strategy may include entry and exit rules, risk management techniques, and position sizing. It's important to fully develop and test a trading strategy before implementing it in the live market. This can help you identify any potential weaknesses or problems with the strategy and make adjustments as needed. Managing your emotions Emotions can play a significant role in trading and can impact decision-making. One of the great benefits of having a trading plan is that it can reduce the impact of emotions on your decision-making. It's important to manage your emotions and stay disciplined in the face of market volatility. Strategies for managing emotions in trading may include believing in and sticking to your trading plan, taking breaks to clear your head, and seeking support from a mentor or trading community. Improving your plan over time It's important to regularly review and adjust your trading plan to ensure it is still aligned with your goals and risk tolerance. This may involve evaluating the performance of your trading strategy and making adjustments as needed. You should analyze both winning and losing trades to find strengths and weaknesses in your plan. Nearly all strategies will work better under certain conditions, and it’s your job to determine what that looks like for your plan. Conclusion Having a well-defined trading plan is essential for traders looking to improve their chances of success. A trading plan can help traders make informed and disciplined decisions and serve as a roadmap for navigating the market. By defining your trading goals and risk tolerance, identifying your trading style, developing a trading strategy, managing your emotions, and regularly reviewing and adjusting your plan, you can improve your chances of success and achieve your trading goals.
Education
by TrendFlowIndicator
1
THE FOREX SUCCESS PYRAMID What is your recipe for success in trading? Developing traders often don’t understand, when you are asking to be a successful (or professional) trader, you are asking not just to build a pyramid, but to sit on top of it. What most forget is the base is the biggest part of the pyramid and the foundation for building higher levels. As the pyramid continues to grow higher, it gets a little more complicated, but you have a base (foundation) and structures in place to carry the stones up to the higher levels. But just like a pyramid, there are more stones at the base and this takes more time to build. Also like a pyramid, there are more traders at the base (not making money or breaking even) then there are at the top. However, with structures and rhythm in place, the fruits of your labor will result in a steady conditioning of your muscles (discipline, diligence and psychology). This will allow you to take on greater and greater heights, challenges and climb the pyramid of trading. Having forex trading discipline, diligence and psychology will give you a sense of confidence and a feeling of mastery over the process. This is the pyramid of trading and the attributes needed to climb to higher levels. While most traders spend time trying to find profitable trades, or the next great system, make sure you take time out to build the attributes which develop your trading muscles (discipline, diligence and psychology). By yourself this can be a very difficult task so it helps to create mechanisms in your life to build these habits. Please, like this post and subscribe to our tradingview page!👍
OANDA:BTCUSDEducation
by EliteTradingSignals
4
The unknown obvious: equity controlIt's easy to get a mili a year if you trade 100M account, that'll be 1% a year. A lil bit harder but still easy af to get a mili of you have 10M capital, that'll be 10% a year. That's how many of "skilled" and famous market participants earn dem money. You might say, "Wait, but that's really not a lot, markets can give much more for these capitals". Yes but given what they have it's all they can do. They been running very shitty bots for decades, they don't really understand how the market works & how to operate. It's especially widespread in cryptos, a lot of people got rich by accident and now they tryna run a business xD Anyways, there's a tool that helps dem all to get that 10%/y for investors money, a very obvious thing that is called equity control. Look at the chart here, is this an equity chart of some1 who've bought TSLA stock during IPO or is it price chart of TSLA stock? If you think deeper, you don't really care about the price of an asset, you care about your equity. If you buy an asset and then look at your account equity after a while, these two charts will be the same. Every strategy can be viewed as a response modifier, it takes an asset chart, for example, IBM stock, and transform it into a different equity chart, with the ultimate goal of having constant always rising equity chart. Market is fractal, the same principles propagate through all the resolutions, they also propagate to your equity chart. How can you affect an asset chart? You can buy or sell, 2 actions. How can you affect equity chart? You can reduce size (down to zero) or increase size, 2 actions. So what these "skilled" and famous participants do, they stop sending they orders to the real market when a shitty bot/trader/manager starts to loose money, but continue trading on a simulator. When this entity starts to earn money again, it gets "connected" to the real market again. How do they define earning/loosing money? They apply the same strategy/quantitative method they use on asset charts. It could be an SMA, I won't be surprised. Thing is, you can use the same concept in the right way, you can apply a good method on your equity chart to boost the performance in certain times.
NASDAQ:TSLAEducation
by gorx1
2
Why Having a Daily Max Loss Will Save You From Going BankruptHello traders, A personal story When I was building scripts for traders back in my Quant days, I often overheard them talking about the "lockout loss" (also called "max daily loss") concept. Once reached, the trading buttons were literally disabled and they couldn't do anything. When I became a trader, I quickly realised when I lost 2 days in a row, something was wrong with me... could be with my sleep, my mood, my lack of focus or energy, my personal life getting in the way. More often than not, I am the reason I'm not profitable regardless of which trading strategy I use. Meditating helps me getting back in a calm state whenever I feel emotions too strongly. If I keep losing for more than 1 week, then I start reconsidering my strategy and tweaking it accommodating for the lack of volatility.... Can only be the lack of volatility because when it's volatile, it's easier to make money... Most traders lose during ranges and markets tend to range most of the time.... here you go... now you know the hidden well kept secret why trading is so difficult... That's because most traders trade what's not moving + they don't have a max daily loss....=> a sure mix to head to Rektland While traders and investors are generally focused on increasing profits, it is also critical to manage risk and reduce possible losses. Setting a maximum daily loss, also known as a stop loss or a loss limit, is one approach to do this. A maximum daily loss is the most amount a trader is prepared to lose in a single day of trading. This may be stated in either monetary terms or as a percentage of the trader's total account balance. Setting a maximum daily loss helps traders maintain discipline and avoid allowing their emotions to take over when things don't go as planned. Setting a maximum daily loss has many major advantages: 1) Cash preservation By establishing a maximum loss amount, traders may guarantee that they do not lose too much of their capital on a single deal. This may assist them protect their total trading account balance and allow them to trade in the future. 2) Managing risk Trading has inherent risk, and it's critical for traders to determine how much risk they're ready to accept. Setting a maximum daily loss assists traders to manage their risk and make better educated, measured transactions. 3) Discipline It's easy to get caught up in the thrill of a transaction and lose sight of the overall danger. A maximum daily loss encourages traders to be disciplined and avoid making rash, emotional judgments that might result in larger losses. It is crucial to remember that a maximum daily loss is not a guarantee against loss; rather, it is a tool to assist traders in managing risk and remaining disciplined. Traders should also be mindful of the possibility of slippage, which occurs when market circumstances change fast and the transaction is completed at a price higher than the stop loss threshold. This one is very hard because even when we stop pushing on the long/short/buy/sell buttons, we see what's going on and we think "if I kept trading, I would have make it all back..." No, you wouldn't have not because the reason you kept hitting your max loss for multiple days is because something is wrong with YOU and you didn't figure out what that is yet. => then you certainly would have failed that "easy" pump/dump move too Conclusion Every 2/3 weeks, assuming I kept increasing my capital consistently, I allowed myself to increase my daily max loss by 20% ish. The percentage here doesn't matter - what matters is increasing it slightly every X weeks to reward ourselves for being consistent. Setting a maximum daily loss is an essential part of risk management for traders and investors in general. Traders may make better judgments and preserve their wealth by defining their risk tolerance and creating explicit loss limits. I wrote tons of other useful FREE articles here: www.tradingview.com Thanks for reading Dave
Education
by Daveatt
2
Position sizing 101 - how to avoid crippling lossesPosition sizing is determining the correct size of the position based on the amount of money you risk on the particular trade. Before you can do that, you need to figure out what is the maximum acceptable risk of the trade. That risk is usually expressed as a % of your balance, that you are willing to lose. To make sure you don’t lose more than this amount traders set a Stop Loss order which is the real maximum exposure of your position. If you don’t use a stop loss, you are exposing your entire portfolio! Where to put a stop loss? That’s where Technical Analysis can be handy. The majority of retail traders would look at the chart to find out – usually behind some support/resistance level or based on some volatility indicator, such as ATR Rule of thumb: Risk between 1-3% of your portfolio balance on each position. This way any single individual loss won’t wipe your account and break your spirit. And more importantly, even a string of losses will leave you with enough ammunition to recoup the losses. Have a clear approach to risk: 1. Set a risk limit for each trade, asset in general, day, week, and month (you won’t risk more than X account) 2. Determine the right position size and start small 3. Increase the position size of trades slowly if your account grows 4. Lower size or switch back to paper trading if your account doesn’t Two types of position sizing methods: Fixed and flexible Fixed position size Using the same position size for every trade Good for finding out if your strategy has an edge Make sure you come back and reevaluate position size periodically. Flexible position size Using a percentage of the current balance Cluster of wins makes every following win larger Cluster of losses makes every following loss smaller How to calculate the correct position size: You need to know 1. Trading account size 2. Acceptable risk (in % per each trade) 3. Invalidation point (in form of a distance from the open price) The formulae: Position size = Trading account size x Acceptable risk / Invalidation Example: 1. Trading account size = $10,000 2. Acceptable risk = 1% 3. Invalidation point = 4% drop in market price Position size = $10,000 * 0,01 / 0,04 = $2,500 This way you will always risk losing $100 no matter where your Stop Loss goes! If Stop Loss must be wider, say 8%, the calculation is: Position size = $10,000 * 0,01 / 0,08 = $1,250 Doubling the distance to our stop loss has us reducing our position size by half to maintain the same possible loss. How to set position size in Tradingview 1. Use the Long position or Short position drawing tool 2. Input your account balance 3. Select the risk you're willing to undertake - either as a % of your account balance or as a monetary value 4. Enter the market price of your Stop Loss 5. Look at the "Quantity" field in the drawing tool = that is the position size you should use to adhere to your risk settings.
CME_MINI:ES1!Education
by CleoFinance
2
⚠️Don't let FOMO ruin your trading⚠️FOMO, or "fear of missing out," is a common emotion that can lead to impulsive and potentially reckless trading decisions. ⚠️ ✅Here are five key rules to help you respect and manage FOMO in your trading: 🔵 Use risk management techniques. Proper risk management is critical to successful trading. This includes setting stop-loss orders to limit potential losses and using position sizing strategies to ensure that you don't risk more than you can afford to lose. 🔵 Seek out education and guidance. If you're new to trading or struggling to manage FOMO, it can be helpful to seek out educational resources or seek guidance from an experienced trader or financial advisor. By learning more about the markets and trading strategies, you can increase your knowledge and confidence, which can help you make more informed and rational trading decisions. 🔵 Take breaks and step away from the markets. It can be easy to get caught up in the excitement of trading, but taking breaks and stepping away from the markets can help you clear your head and make more rational decisions. 🔵 Don't let emotions drive your trades. FOMO can lead to emotional trading, which is often not based on sound analysis or strategy. It's important to stay disciplined and base your trades on objective criteria rather than letting emotions drive your decisions. 🔵 Set clear trading goals and stick to your trading plan. Having a clear understanding of what you hope to achieve with your trades and a plan to achieve those goals can help you avoid making impulsive decisions driven by FOMO. 👤 @Galerdev 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate my work , Please like, comment and follow ❤️
Education
by TradeConf
Emotion-Free Trading After a Loss✅1. Don't panic: Losing a trade can be frustrating, but it's important to remain calm and not make any hasty decisions. Remember that investing in stocks and cryptocurrency carries inherent risks, and losing a trade is a normal part of the process. 2. Don't hold onto a losing position: If a trade is not going in your favor, it's generally a good idea to cut your losses and sell the position. Holding onto a losing position in the hope that it will turn around can lead to even greater losses. 3. Don't chase losses: Trying to recover losses by making risky trades or investing more money is a common mistake made by investors. This approach is often referred to as "revenge trading," and it can lead to even greater losses. 4. Don't give up: Losing a trade can be a setback, but it's important to stay the course and continue to invest in a disciplined and strategic way. Don't let a losing trade discourage you from reaching your long-term investment goals. 5. Don't ignore risk management strategies: It's important to have a plan in place to manage risk, especially when losing a trade. This could include setting stop-loss orders, diversifying your portfolio, or using other risk management techniques. Ignoring risk management strategies can lead to even greater losses. 🚀For updates on the latest developments in psychology, market trends, and important news, follow our page. Stay informed and stay ahead of the game with our regular updates.
Education
by TradeConf
Trade with Confidence: 5 Day Trading Psychology Rules to Embrace Set clear goals and limits: Before you begin trading, it's important to have a clear idea of what you hope to accomplish and how much risk you are willing to take on. This will help you make informed decisions and avoid making impulsive trades based on emotions. Control your emotions: Day trading can be stressful, and it's easy to let emotions like fear or greed influence your decisions. It's important to stay level-headed and stick to your pre-determined trading plan, rather than getting caught up in the heat of the moment. Use stop-loss orders: A stop-loss order is a type of order that closes a trade automatically once it reaches a certain price. This can help you minimize losses if the market moves against you. Diversify your portfolio: Diversification is a risk management strategy that involves spreading your investments across a variety of asset classes. This can help you manage risk and potentially earn higher returns over the long term. Continuously educate yourself: The world of day trading is constantly evolving, so it's important to stay up-to-date on the latest trends and techniques. This can help you make informed decisions and improve your chances of success.
Education
by TradeConf
3
9 lessons from Traders Who Made Multiple 8 figuresHello Traders Losses Losses are an unavoidable element of trading, and it is important to understand that they are a regular part of the process. It's critical to remember that even the most successful traders suffer losses, and how they deal with such losses defines their total performance. Setting stop-loss orders, which are orders that automatically end a trade when it hits a specific degree of loss, is an important component of loss management. This may assist traders limit their losses and safeguard their wealth. It's also critical to have a strategy in place for dealing with higher losses, such as reducing transaction sizes or taking a vacation from trading. To new traders reading this, don't get scared... you're going to blow up your account at least once. Because, if you never did it, you never experienced how painful that is to lose your gains, initial capital, dreams. You need to experience that once so that your brain knows you'll never get to that dark place again. There is no other way, even if you follow guidelines from successful traders... I guarantee you that sooner or later, you'll blow up your account if it never happened to you yet. Every successful trader I know blew one or more accounts My wish for you is that it happens early in your trading journey so that the capital loss is small relative to your future potential gains Discipline Discipline is an essential characteristic for every trader to have. Trading can be a turbulent and fast-paced atmosphere, and it's easy to get caught up in the market's enthusiasm or anxiety. Discipline, on the other hand, enables traders to remain focused and adhere to their trading strategy even when emotions or other events attempt to distract them. My discipline strategy is two-folds: 1) When I capture a 1 or 3 great intraday moves, I stop for the day. I don't want to give my gains back. I close my trading station and stop watching the market as I'll always end up thinking "oh it keeps moving, I could have made X USD more" 2) It's being patient as it could happen I'm getting ready to trade at 6 am but nothing happens before 5 pm... leading me to wait wait wait.... for a decent setup to appear. This is not a natural skill at all, I acquired it Preparation Proper planning is crucial for trading success. This involves having a sound trading strategy in place as well as a clear grasp of the market and the instruments being traded. It is critical to evaluate and update this strategy on a frequent basis to ensure that it remains effective and current. Preparation also include maintaining current on market news and events that may have an impact on the assets being traded. Reading industry journals, following financial news sites, and engaging in online groups or forums may all help with this. As an intraday trader, I check every morning what are the main events of the day and make sure to not be in a trade or be at least SL/breakeven around macro events such as CPI, FOMC, etc... Risk Risk management is an important component of trading. This involves knowing the degree of risk associated with various instruments and techniques, as well as ensuring that only a suitable level of risk is taken on given the trader's risk tolerance and money. It's vital to remember that profit potential is exactly proportional to the degree of risk taken. This indicates that although greater risk tactics have a larger potential for profit, they also have a higher chance for loss. I'm a risk adverse trader overall... though when I identify a very profitable potential setup... I push on the pedal for real... meaning I increase drastically my position size. Emotions Emotions may be the deadliest adversary of a trader. If left uncontrolled, fear, greed, and overconfidence may all contribute to bad trading judgments. Meditation helped me a lot for that It is critical for traders to identify and manage their emotions when trading. Setting limitations on the degree of risk taken, placing stop-loss orders to safeguard against excessive losses, and taking pauses as needed to clear the mind are all examples of this. Frustrations Trading may be unpleasant at times, particularly when you're dealing with losses or a streak of bad transactions. Traders must remember that setbacks are a typical part of the business and keep focused on the long-term objectives. Taking pauses, finding support from others, and being disciplined may all help traders get through these trying times. Being ok with being frustrated is also NOT a natural skill and has to be acquired. I know now when to label when I'm frustrated and what to do to relax (meditation, stretching, deep breathing, self-massage, classical music, ...) Frustrations have a compounding effect leading to greater and greater frustrations and losses. And we get frustrated because... we lost money or didn't make as much as we could... The richest traders I know are the ones who are able to disconnect completely their trades from the monetary value. Which kind of impossible when for most 1 trade >= 1 month worth of rent => leads to too much mental pressure and stress. Failure Failure is an inevitable part of the learning process, and traders must understand that it is OK to make errors. What matters is how traders react to and learn from their errors. It's critical to assess what went wrong honestly and make the necessary changes to prevent repeating the same errors in the future. Hesitation Hesitation may be detrimental to a trader's success. In the fast-paced world of trading, traders who are hesitant may lose out on chances or join transactions too late. Traders must make judgments swiftly and confidently, while also understanding the possible risks and benefits of each deal. Journey Trading is a journey, and traders must approach it with a long-term view. This entails accepting that there will be ups and downs and being dedicated to ongoing learning and growth. Setting reasonable objectives and celebrating minor accomplishments along the way are also crucial. Thank you for reading David
CME_MINI:ES1!Education
by Daveatt
5
What Is the Margin of Safety in Investing/Trading?Hello traders, The gap between the true worth of an investment and its current price on the market is referred to as an investment's margin of safety. The margin of safety is a concept that is utilized in trading and investing. It is a buffer that protects investors against the possibility of incurring losses as a result of the volatility in the market or the occurrence of unanticipated occurrences. It is possible to incur a loss while investing in stocks, bonds, and other securities since the value of these assets is subject to significant shifts during the course of their ownership. Investors may mitigate this risk with the assistance of a margin of safety, which ensures that they are not paying more for an asset than what the item is really worth. This indicates that the investor may still make a profit when selling the asset, even if the price at which it is traded on the market drops. The difference between the market price of an item and its intrinsic value may be subtracted to arrive at one method for calculating the margin of safety. If a company's intrinsic value is $100 and it is now trading at $120, for instance, the margin of safety for that stock is $20. This indicates that the investor will still be able to sell the shares at a profit even if the current market price of the stock drops by $20. You may also determine the margin of safety by dividing the asset's intrinsic value by its current market price. This is still another method. The investor will get a percentage as a result of this calculation, which will indicate the level of protection they have against prospective losses. If a share of stock has an intrinsic value of $100 and is now trading at $120, for instance, the margin of safety is 16.67% (100 divided by 120 equals 8333). This indicates that the investor will still be able to sell the shares at a profit even if the price of the stock on the market drops by 16.67%. The margin of safety is a tool that investors may use to decide whether or not it is worthwhile to make an investment. It is possible that purchasing the item would be a wise decision if there is a large margin of safety. On the other hand, if the margin of safety is minimal, it is probably best to steer clear of the investment and hunt for something else that has a bigger margin of safety. When it comes to trading and investing, one of the most crucial concepts to understand is the margin of safety. Investors are able to better protect themselves against the possibility of loss and make choices on their investments that are more informed as a result. What about crypto assets? I'm not a big believer but most blockchain indicators are right now in the mega buy zone for Bitcoin - telling us the margin of safety to buy now is big The reason I don't like them much is that they could stay in that zone for years, and I'd invest blocking my money for years before the real pump happens - which represents a missed cost-opportunity if I'd invested that money elsewhere My preferred way is to get a swing H4 or H8 buy signal based on my trading strategy as it's more reliable because most of the actions justifying a price move happens on the exchanges regardless of the hashrate, difficulty, number of addresses holding Bitcoins, etc. Thank you for reading Dave
NASDAQ:TSLAEducation
by Daveatt
Ask yourself this questions before investing money in any coinHow to DYOR? Quick guide 90% of the time, the market is in a condition of uncertainty, which necessitates analysis. Before any investment, you need to ask yourself the question "is it worth it?" or "why can this project be profitable?". And, in order to fully comprehend the project, I've compiled a thesis list of questions that you should always ask yourself when conducting your own study. We always begin at the project site. There, you will be welcomed with a brief summary of the project, so be sure to read the Whitepaper/Docs to learn more. At this point, you should ask the following questions: What exactly is this project? What is the point of it? What possibilities does the project offer? What are the project's RoadMap plans? Next, you must determine who is the success guarantee: What sources of funding aided the project? What are some examples of these funds' success? Will the funds be interested in the project's and the token's subsequent development? It is also critical to assess the hype surrounding the project as well as the audience's involvement. Be cautious and double-check official sources. The more successful the initiative, the more scams will surround it, and you will be added to various groups where they will offer to send money. Don't fall for these ploys! How active are the project's social networks? (Telegram, Twitter, Medium, GitHub, and so on.) How involved is the team in social media support? Is there a program for ambassadors? Nodes (do they update and function properly)? We assess other initiatives' trust and application. How many other projects have already offered assistance? How can they be of assistance to one another? Check out the feedback from partners on our pages (after all, you can merely tag that Solana supports you, but they have no idea). Check out the social subscription networks of notable people for this project. A nice technique to keep an eye out for such "friendships" on Twitter. Avoid anonymous teams and projects that do not identify their developers or team at all. Admins or project members will never send you a personal email offering to acquire their tokens! From a personal standpoint, would you trust these guys with your money? What country does the team represent? What projects have the team members previously worked on? How interested are they in the project's progress, or do they prioritize obtaining funds and creating the token? We assess the demand potential and the technological quality. What competitors are there already? How popular is the competitor's technology? How much more advanced is our technology? It is critical to understand which and how many tokens will be available for purchase on the listing, therefore we investigate the unlocking / vesting periods for each item. You can calculate the approximate capitalization at the latest sale price and assume the expected price pressure after receiving the number of tokens available at the time of listing. Why is a token required? How will the token be put to use? To whom are tokens given? How many tokens are there in total? How much does the team own? How many tickets were sold in the Seed and Private rounds? What price did you enter these rounds at? What are the terms (locks, vesting)? How many tokens were given out to society? How many tokens will be given out as rewards? How many tokens will be sold during the Public Sale? What networks is the token compatible with? What kind of liquidity will be available as a result of the listing? Following that, we went out to compare the data to the projects of competitors. We will be able to estimate the growth potential in this section. And now that you've gone through all of the questions, you've decided to put money in this project: We decide when and under what conditions it is best to deposit money. We investigate the terms of selling. We consider the format as well as the sales platform. We research the platform from which we intend to make a purchase. If the sale is not at a predetermined price but on Balancer or Mesa, we consider the token's fair price. If the sale is in the form of a lottery, try opening multiple accounts to maximize your chances of winning. Consider the averaging method on the listing depending on the condition and format of the transaction. Examine the project's scheduling carefully; otherwise, the funds in the project may be frozen for an extended period of time. At the outset of the voyage, you must determine a reasonable price and set profit goals. In the event of failure, you must plan ahead of time to make up for the loss. Divide your sale into various objectives, the first of which is the return on your initial investment. Conclusion Furthermore, you may always avoid conducting your own study by reading other people's pre-written project assessments. After all, they could simply pay for the review in order to attract money and then dump it on you. As a result, there is no place in the cryptosphere without DYOR. You make all of the decisions. You must also accept responsibility for the outcome. Make sure to pay attention to money management and dangers. Do not put more than 5% of your deposit into a single project.
BITSTAMP:BTCUSDEducation
by Crypto4light
2
The 5 Outcomes Of a Trade | How not to blow your account Successful traders know there are 5 outcomes that can come out of a trading position. When managed well these outcomes can lead to great success. However, when manage badly can cause disaster to a trader’s account. Below I’ll highlight and discuss the possible 5 outcomes of a trade and how you can manage them. 1. Small Profit This is when a position ends in a very small profit, for trend traders, this is usually the case. However, in this situation, there is no loss. 2. Small Loss This is when you lose a small amount at the close of your position. This is part of normal and good trading. In fact, you should cut your losses early. Taking small losses or cutting your losses early will help you stay in this business long term. 3. Breakeven This is a position where you really didn’t make or lose any money. They’ll come too, they are not necessarily bad trades. These types of trades may just mean you should find re-entry to the position or may just be a quick exit without a loss or profit. 4. Big Profit This is when a position ends in a very big profit. This type of trade does not come too often but when they do come they are the trades that move your general account return for the period to the next level. As a trader, these are the type of trades you should look forward to. 5. Big Loss This is when a position ends up closing at a very big loss. This type of trade should never happen on your trading account as a pro-trader. This is the type of trade that can blow your trading account. It’s why you should know how to cut your losses quickly and take a small loss. I’m glad I’ve been able to share with you the possible outcomes of a trade and how you can manage them properly. A simple knowledge like this can suddenly turn your trading account to become profitable. Please, like this post and subscribe to our tradingview page!👍
Education
by EliteTradingSignals
7
The Biggest Mistake Novice Traders Make When Learning To TradeI wasted a lot of time from years one to four in my trading career. Being scammed led me to decide to create my unique trading strategy. I used the course material I bought and google to do so. It worked but after years of pain and suffering. If I had continued searching for a legit trading coach, I would've succeeded much quicker. But I'm grateful because I learned a valuable lesson, which is to always... Start By Mastering An Existing Trading Strategy Before Creating A Brand New One. Ignoring this advice, especially as a novice trader, will stop you from succeeding on time. For that reason, trying to create something new that you don't have experience with is useless. Because it will waste the mental energy and time you need to master what you already have to move forward. Thus committing to grasp the details of a trading strategy will save you from mental battles that hinder your growth. You'll also free up time to develop the following key ingredients for trading success: 1. Trading and Risk Management (Business) Plan. 2. Risk Management edge. 3. Psychological edge. 4. Journalling Habit. With that said, let me show you how to flourish as a novice trader, below. Find a legitimate trading coach with a proven track record. Having a professional trader coaching you through your journey will make it a bit easier and more fun. But there aren't many legitimate professionals who will make that possible. The industry has a lot of scammers who only make money from selling courses. That's not a problem though as there are traders who live off trading. Your job is to find them. How? Do research before buying a course: 1. Pick 2-3 traders you perceive as legitimate. 2. Check if their course will help you develop the 4 ingredients for trading success. 3. Check the coach's Trustpilot for course/community reviews. 4. Do research by contacting people who have bought it. 5. Ask for the coach's trading (Myfxbook) statistics. 6. Join their free communities to ask questions. Once you’ve found your perfect match, focus on studying and mastering his/her course material till you become a profitable trader. And while doing that teach other people your skill for free. This will quicken the process of learning, understanding, and mastering. After that form new trading strategies to maximize your gains and sell to other people for extra cash. Following the advice above, will save you years of pain and suffering in exchange for fun years of rapid growth and success. So trust the process and you’ll make it.
Education
by Doji-2k1
1
Learn How to Apply a Position Size Calculator Hey traders, In this educational article, I will teach you how to apply a position size calculator and calculate a lot size for your trades depending on a desired risk. First of all, let's briefly discuss why do you need a position size calculator. Even though, most of the newbie traders trade with the fixed lot, the truth is that fixed lot trading is considered to be very risky. Depending on the trading instrument, time frame and a desired stop loss, the risks from one trade to another are constantly floating. With the constant fluctuations of losses per trade, it is very complicated to control your risks and drawdowns. A lot size calculation, however, allows you to risk the desired percentage of your capital per trade, limiting the maximum you can potentially lose. A lot size is calculated with a position size calculator. It is integrated in some trading platforms like cTrader. If it is absent in yours, there are a lot of free ones available on the internet. Step 1: Measure a pip value of your stop loss. It is the distance from your entry level to your stop loss level. In the example on the picture, the stop loss is 290 pips. Step 2: Open a position size calculator Step 3: Fill the form. Inputs: Account currency, account balance, desired risk %, stop loss in pips, currency pair. In the example, we are trading with USD account. Its value is $20000. Trading instrument is EURUSD. Step 4: Calculate a lot size The system will calculate a lot size for your trade. 0.069 standard lot in our example. Taking a trade on EURUSD with $20000 deposit and 290 pips stop loss, you will need 0.069 lot size to risk 1% of your trading account. Learn to apply a position size calculator. That is the must-use tool for a proper risk management. ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
Education
by VasilyTrader
5
Reflecting on 12 years of Trading - Do's and Dont'sHello traders, Feeling a bit emotional today while writing this piece of content. From my trading journal I kept updated for more than a decade... I want to share what differentiate a profitable trader from the crowd (losing money) In trading, you are guaranteed to lose your time and money if one: can't sit on his/her hands when there is nothing juicy to trade plan trades he/she never execute and execute trades he/she never planned let emotions from the last trade(s) affecting his/her next trade(s) can't understand markets can remain illogical longer than he/she can remain solvent end your trading day with his/her last trade... it must end when one has journalled them all and learned lessons bury his/her head in the sand instead of studying the mistakes made wants to forget previous mistakes... you have to remember them...writing them down on a post-it and having them staring at you whenever you take a trade. Great process to remind to not repeat the same mistakes. doesn't add onto winners because doesn't know how to identify strong momentum... instead take profit too early is confident when he/she should be fearful and vice-versa treats trading like an entertainment and not a job Feel free to read my numerous other educational FREE content from my profile page Thank for reading Dave
Education
by Daveatt
5