When it comes to trading, it’s important to understand that there is a risk involved. Whether that risk is big or small depends on your trading plan and how much work you put into ensuring that you understand everything that is happening not only within the trade but around it as well. It is also important to put steps in place that allow you to manage your risk, lowering the potential for failure as much as possible and protecting yourself and your money. To do this, you need to think about a number of different elements – read on to find out more and to ensure you mitigate any risk when trading. Risk management is key to long-term survival.

Set A Stop Loss

If you don’t set a stop loss at a point that is comfortable to you, you are running the risk of losing everything if something goes wrong within a trade. Your numbers might be doing well, but any number of external factors can mean that your profits suddenly fall, and without a well thought out stop loss in place, you could end up with less than you started with, or at least a much smaller profit than you had hoped for. If the market moves negatively against your trade, a stop loss will prevent the worst from happening. Where you place that stop loss will depend on your trading charts and how much risk you want to take.

Have An End Point

Once you enter a trade, you are in. There is no automatic exit, so if you’re not watching what is happening, your money could be lost forever, or you might have to wait a long time to see any kind of return (or to break even).

Therefore, having an end point set when you trade is crucial. This way, you can ‘set and forget’ (for the most part) and know that your trade will end either at a specific time or when the profit (or loss) reaches a certain point. This can go hand in hand with your stop loss, but doesn’t have to be the same point.

Automate

If at all possible, automate as much of your trading as you can. This way, your trades will begin at the right points for your charts to make sense, and will end when you have made a specific amount of a return. Choose a level that makes sense to you and set up your end point so that once that level is reached, you automatically sell and leave the trade. By doing this, you should see a win more often than a loss.

Use A Trailing Stop

A trailing stop is one that moves when your profits move. This can be an ideal way to protect your trade for those who are more experienced, and understand more about the different ways the market can move, and the nuances that make all the difference when it comes to profits or losses.

A trailing stop is one that moves with the profit, changing position depending on how much the trade is growing or otherwise. If the market changes, your stop point will change too, protecting you and your money and meaning that you don’t have to adjust your stop position manually.

Stay Alert

Although it’s good practice to try and set a trade and leave it to work alone – if your charts are well crafted and you have the right stop losses in place, this should never really be an issue – it’s also a good idea to stay on top of the markets and understand what is happening, just in case urgent evasive action is needed.

You can do this by setting up alerts either via text or email so that as soon as something pertinent to you changes within the markets, you can be informed about it and choose your next step accordingly. It’s good to leave your trade to its own devices for the majority of the time – no one wants to be stuck to a screen watching every movement, especially when you have a job and family to spend time with – but knowing the important movements is something that could save you a lot of money in the long term.

Know Your Profits and Losses

How much do you want to make on a trade? How much are you willing to lose? Having these figures in your mind will help you to mitigate your risks because you will know when you are ready to complete a trade and when you should continue with it. When it comes to trading, the majority of what you do can be flexible, but these two elements – your profit and loss – should be set in stone. Don’t be tempted to push either of them further than you are comfortable with and your trading should be successful and your risk is easily managed.

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