2021-04-20 13:06:12
#principle -
risk management
Apart from the trading setups, I would like to cover some educational aspects of trading as well. I am doing it for the sake of systematizing my personal experience as well as improving my approach towards markets. I will do my best to keep these notes short and concise.
This one is dedicated to
risk. Managing your risks is the most essential part of trading. I would even say that risk management is even more important than an entry point of the trade. I tried tens of different strategies, but I still did not learn to properly manage my risks. I can make up to +300% a month and be super profitable for several months in a row and then start losing everything.
It happens not because the market starts changing behavior, it happens because of me. Something triggers in my brain that forces me to act differently. Several stop losses in a row switch off my fear and I start neglecting risk management principles.
I was trying super hard to train my brain and subconscious mind to follow the system but some emotional impulses like greed and fear destroy it. I lose control over everything and forget the rules that I set for myself. Recently, after I buried my last account I gave up and concluded that it is almost impossible to control yourself in times when you are emotionally unstable. Without control, you can forget about making substantial money via trading. So, I decided that there should be someone external who covers my weak spot. My choice was to set up a risk manager that acts as a watchdog and limits my risks when it is necessary.
My risk manager got triggered 3 times last week (I was definitely in the wrong state of mind ). And the best part is that I could finally relax and reflect on my mistakes afterward (as there was no pressure anymore). As the result, I decided to take few days off from trading to get my focus back.
The whole key is to be honest with yourself, find the weak spots, work on it, get it done…
PS I attached one of my performance figures, to show you what happened to me after I experienced nice profits. In the end, I lost it all, as I couldn’t manage the risk, as my brain was neglecting everything. My advice to you - build a solid risk management system, otherwise, your efforts in trading can vanish super quick!
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