What is the difference between rash gambling and professional trading?? For most, the correct answer is: in risk management. Many traders believe, that proper risk management is critical to long-term success. Here, what professional traders told me, answering the question about risk management. Mark: “You may not have the best trading strategy., but, if you have good money management rules, you can make money. If you have poor money management, never mind, how good is your strategy. Eventually, you will lose money ". Chris: “You must have a margin of safety for your survival., work this way, that even, if you were throwing the dice, choosing random stocks to buy, you could survive in the market ".
Money management is considered very important, but how to properly manage risks? Some traders use very specific rules to manage risk, such as the risk of a small percentage of capital on each trade. Other traders don't have specific rules, however, they often analyze their past moves and decisions.
However, not all successful traders always manage risks.. Sometimes they take a big position, if you are sure, what to get great, substantial profit. When they believe, that they are right, they just rely on fate. This tactic can lead to big losses., if they turn out to be wrong, however they do not neglect it.
Is it possible to risk large sums? When it comes to trading, then there is no single "correct" way to trade. Everything, what can you do, is to take into account the advantages and disadvantages of each approach and solve, what approach do you want to use. The willingness to take big risks can depend on your experience and trading skills.. If you are new, then you are unlikely to be able to adequately assess the reliability of the methods used. In this case, you shouldn't risk large sums of money. For newbies, it is often very important to control your risks (for example, risk only a small percentage of the deposit on each trade), so, so that they can survive in the market long enough, to reach a certain skill level. main reason, where trading coaches extol the benefits of risk management, lies in the fact, that newcomers very often want to become rich right away. Meanwhile, the experience and skills of newcomers are not enough to take such colossal risks. Very often they lose all their money in a few big deals., and are forced to look for funds for a new deposit. Instead of, to build up your trading prowess, they fruitlessly step on the same rake, squandering deposits on risky transactions. These traders will never get a chance to learn to trade.. Against, those newbies, who manage risks for a long time, get the opportunity to learn how to trade, even before they drain their deposit.
When trader gains experience, he can try to reach the "next level" and make more money. Experienced traders reach the asymptote, at that point, when the restrictions imposed by themselves do not allow you to earn large profits. It's very hard to overcome this barrier, nobody knows for sure, why. Very experienced traders, who want to make big profits, there is a need, break the rules, overcome the barrier set by them earlier. It is very risky, but experienced traders often want to take risks for big profits. They say, who can afford greater risks. As experienced traders, they can afford to take risks, unlike newbies. In this way, there is no single right way to trade, if you are new to trading, money management will allow you to survive and learn to trade and then you can make a profit, you can't even dream of.
