Higher profits with Less risk

By assessing the potential losses against potential gains, traders can choose the most advantageous balance between risk and return, which prevents capital on the one hand and on the other increasing confid ence - Jeff White, founder of TheStockBandit.com.

Jeff, many people today talk about risk management, but what exactly does it mean for a market trader? How do you do this?

Yes, it's quite an interesting question. Market requires that you take a risk to get returns, so I guess everyone understands that there is an element of risk in trading the financial markets, but what is more important, you do not need to be high risk traders to do well .

Market is important to first develop thinking and mindset of survival, and then to develop a mindset focused on profits. Your initial goals should focus on trade in small volumes to be able to withstand the impact of the market when you're wrong. This will keep you in the game and allow you to take the new opportunities that will arise, and then we can focus on profits.

Most traders focus in the beginning on "How can I earn from this trade" rather than ask themselves: "Can I manage a successful deal?" Everybody is talking about placing stop loss and stick to it with the necessary discipline. Of course this is only one part of it, but I need to do more to manage risk and to place stop?

I think there is. As traders should approach each transaction with understanding and accurate idea where will be your stop. I personally trade on technical analysis methods, so watching the chart I want to know where the trend will show weakness and where we fail. Where will model for reverse. I want to know at what level should leave the transaction.

It is important also to be approached with an appropriate volume of account transactions. I want to know in advance what a loss I can not take, and how much can I lose in this deal to have substantial capital to accomplish his next deal.

Many traders say that they want to risk a fixed amount from their accounts for certain transactions. What can advise those traders who want to ask you how much money to risk in a edinstavena deal.

I think it's good to have a preliminary maximum volume loss, this amount may be changed from time to time based on how well the results of the trade. This can be 1% of akanuta can 0.5%, and this varies and will be different because of the risk tolerance of each trader - ie to what extent will feel comfortable during the transaction. Many traders when they open position means that you need to protect your capital, but many forget that we also have to protect themselves and their confidence all the way.

I know many traders who lose confidence in themselves before they lose their capital, so it is very important to continue to trade considering that path you will have bad deals.

Keeping small positions you can endure the losses that are an integral part of the game, but this way you can go ahead and ahead.

If you have three or four successive transactions in which I was on the right track, I have to do a fourth or fifth because that it can be one that will bring a turnaround?

Absolutely. In fact, the good correlation between the risk / return, this gives an opportunity to take consecutive losses and a win-win deal to erase small losses. I think the goal should not be directed to perform more accurate transactions, and for it to earn more when I'm right and lose less when I'm in the wrong direction.

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