Risk & Money Management Trading Strategies Used By PROs (Only 1% Apply These...)

TL;DR

Learn how to improve trade and risk management by implementing these 10 tips and avoid common mistakes that cause traders to lose money.

Transcript

Risk management and trading discipline usually rank very low on the priorities list of most traders. In today’s video I will share 10 tips that will help you improve your trade and risk management and avoid the most common problems that cause traders to lose money. 1. Never use fixed stop loss orders A common mistake is to use a fixed amount of poi... Read More

Key Insights

• 🧡 Placing stop losses should consider the market's volatility and average true range to account for price fluctuations.
• 🥺 Emotional decision-making can lead to premature closing of trades; decisions should be based on technical analysis.
• ✋ Moving stop loss orders to breakeven too quickly can result in exiting potentially profitable trades prematurely.
• 🌸 Understanding market correlations helps control exposure and avoid doubling losses with correlated trades.
• 🌸 Leverage can magnify gains but also increase losses, so select an appropriate level based on risk tolerance and experience.
• 👻 Keeping a trading journal allows for self-reflection and learning from past trades.
• ✋ Giving stop losses room to breathe and following position sizing principles are crucial for risk management.
• 🍧 Having a trading rules checklist helps to ensure that trades match predetermined criteria and reduces the chances of making mistakes.
• 😫 Realistic take profit targets should be set based on support and resistance levels and the average true range indicator.

Questions & Answers

Q: Why should I avoid using fixed stop loss orders?

Fixed stop loss orders do not consider the market's volatility and may not provide adequate protection. It's important to factor in the average true range and recent price levels when determining stop loss placement.

Q: How can I control exposure with correlated trades?

To control exposure, avoid opening positions for highly correlated instruments. Understand how different instruments relate to each other and why some move together while others diverge.

Q: How does leverage impact risk management?

Leverage allows trading with more money than you have in your account. While it can amplify gains, it also increases losses. Select a leverage level based on your risk tolerance and experience, starting with lower levels if you're conservative or still learning.

Q: Why is it important to keep a trading journal?

A trading journal allows you to review past trades, identify strengths, and spot areas for improvement. It helps you learn from your mistakes, develop consistency, and gain insights into your trading psychology.

Summary & Key Takeaways

• Avoid using fixed stop loss orders and consider the market's volatility and average true range when determining where to place your stop losses.

• Don't close trades based on emotions; make decisions based on technical analysis.

• Be cautious of moving your stop loss to breakeven too quickly as it may result in being kicked out of a potentially profitable trade.

• Understand market correlations to control exposure with correlated trades.

• Leverage can maximize gains, but it can also increase losses, so select the appropriate leverage level based on your experience and risk tolerance.

• Keep a trading journal to monitor your past trades and identify strengths and areas for improvement.

• Give your stop loss room to breathe by not placing it too tight and consider position sizing.

• Create a trading rules checklist to ensure that every trade matches your criteria and avoid making mistakes.

• Set realistic take profit targets that consider a sensible risk to reward ratio.

• Understand and conquer your fears in trading to become a better trader.