One thing sure that all traders know about is that trade currency and the market that goes along with it is one that always has risk, and how well they manage their risk is one of the key factors which determines just how much money they can make on their trading. Now, how do you pin a number on risk and how would this really help you? Well, it is very hard to quantify risk but there are solutions to get around this.
Sometimes, it is way too easy for us to forget that risk even exists simply because we are just focusing our vision on looking for viable trading opportunities for ourselves. Poor risk management is tantamount to poor trading discipline, and those two are deadly combinations when it comes to emptying out your trading account. If you forget this, well the market has been set up in a way where you will be reminded all too painfully on just how much risk there is and how much it can hurt you when you turn your back on it. In market terms, profit always comes with loss, because to get to profit, you would have incurred a few losses along the way and this is only natural.
The enemy here is risk and it is how well you manage risk will determine just how much money you will be losing in the end of the day. Of course, there are certain numbers that we can assign to certain levels and aspects of risk, but we cannot do this holistically and these numbers will not hold up with time as when the market changes, so will the risk that comes with it. This is why you need risk control, because without it, all your winning trades will be wiped out in a single blow. There are certain things you need to have and one of them is fear of loss. You need to respect loss and use this fear as a way to build up sensibility in how you trade.
Simply flying off the handle and forgetting that risk is always there waiting, will cause you to lose all your money in a speed you did not think was possible. Also, you need to set down a clear list of profit objectives for yourself, and cut greed out of the equation. Take calculated risks, knowing just how much you stand to lose and how much you stand to gain and make sure that these two levels are within your sphere of tolerance. Timing is also very important and when it comes to your financial objectives on the market, they need to be timed. Risk is something that is variable, and how much exposure you have to the market will only increase your risk. Poor traders who do not understand these basic fundamentals will become investors, holding on to bad stock or currency in the hope to ride out the market downturn and make their money when prices go upwards.
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