Risk management belongs to long-term traders who need to have capital management skills.
1. What is a risk plan.
Before trading, first check how much capital you have. How much risk are you willing to take on each trade? This needs to be planned in advance. The proportion of risk generally depends on your capital and your ability to make money outside the market. For example, if your invested capital is 500,000 and your off-market income is 100,000 per month, your monthly risk plan should not exceed 20,000, which is less than 20% of your off-market income and 4% of your total capital. This ensures that in case of particularly bad luck, with consecutive wrong trades, the loss in your account will not affect the future. For professional traders, the risk of each trade should be controlled within 2%, and the trading loss for the month should not exceed 10%. If it exceeds, force yourself to take a break and think carefully about that month’s operations.