Professional traders always take things differently. They are not biased in favor of an emotional approach. They stick to their basic rules and trade with discipline. To become a successful trader, you must adopt the traits of the professional traders. But in this article, we are not going to discuss the traits of the professionals. We are going to discuss some of the key risk management policies used by highly skilled traders. If you can follow the tips in this article, you can expect to become a pro trader in less than a year.
Trade with a 1% risk
Those who have less than 1 year of trading experience, should never risk more than 1% of their account balance. Managing losing orders is a very tough task. In most cases, naïve traders become emotional and start placing random trades without knowing the consequences. As a result, they blow up their account. Feel free to do some digging on the success rate and you will be surprised to find that more than 96% of retail investors are losing money. So, if you wish to become a profitable trader, stick to this rule for the first year.
Use protective stops
You must learn to use protective stops. Getting biased with mental stops is not going to work. Many people have tried to boost the profit factor by using a big lot. When the traders trade with big lots, closing the trades with big loss becomes difficult. In most cases, they end up losing a big portion of their investment. But if you start using the protective stops like the pro-Singaporean traders, you will know the maximum amount of money which you can lose in a certain trade.
Those who rely on indicators to use the stop are not going on the right path. The stops need to be used based on the SR (support and resistance) levels. For that, you should also gain access to a robust trading platform. Feel free to view the page created by the high-end brokers like Saxo and see why they are different in terms of providing a trading platform.
Trading the reversal
The professional traders never fear trading the reversal. They take smart decisions and place their trades in a very smart way. But to trade the key reversal you should learn to use the major chart pattern. Learn about the head and shoulder chart pattern and you can trade the bearish reversal. To trade the bullish reversal you can use the inverse head and should chart pattern. By using this technique you can reduce the risk in the reversal trading method. Those who are thinking the professionals use some sort of secret tools to trade the reversal are making a big mistake. They rely on a very simple method and they never make things complex.
Trading the news
During the news trading method, you should limit the risk in every possible way. Taking too much risk and try to secure a big profit is nothing but putting your investment in the line of fire. To trade key news, you have to be careful about the risk exposure. Stop taking more than a 1% risk during the volatile market. You might have more than 1 year of experience still news trading is a very complicated process. So, follow the safe path in trading and try to limit the risk by following standard rules.
To manage your risk, you have to use your intellect. Stop looking for a secret formula because it doesn’t exist. Stick to the rules mentioned in this article and you will never blow up the account. Keep fixing the faults in your trading method by learning from your mistakes. Last but not least, use leverage in a very effective way.