Saturday, July 29, 2017

Risk Management for short term traders

Probability and Risk Management 



In trading there are two important parts

1. Probability 
2. Risk Management. 

Probability of you being right is pretty high but the problem comes in Risk Management.

Traders with limited capital is exposing to big risk and striving for big profits. In general, traders risk 2-5% of their capital on one trade and if they have good probability then they shall end up in profits at month end. 

What went wrong here is, traders with capital of 5Lacs, who are supposed to expose to risk of 2-5%, meaning 10K-25K are exposing themselves to higher risk, which is basically reducing their probability to trade in more stocks and end-up only trading in two-three trades in their portfolio in which one with big loss and others with small profits. 

Therefore, I would like everyone to understand before entering any trade that the risk of being in a trade should not excel 2-5% of your capital per trade, if it does as per your capital then do not trade or trade in equity or cash.

Risk management truly helps in protecting capital and allows us to trade more in good trade setups. I hope it adds value to your trading experience.

Thanks for reading Do share it with your traders if you found thid to be helpful.
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