"For Beginners and Professionals"
The key elements to consider when creating a strong risk management strategy during trading are:
* Risk in trading: This should be expressed as a percentage of your trading account balance.
This percentage should range between 0.1% to 3% for each trade only.
* Position size: This refers to the size of the position.
Leverage markets provide opportunities to open larger trades with less capital.
However, losses can be very large if the position is not managed well.
* Initial risk level: This is where the first stop-loss order is placed after activating the entry order, usually when executing a trade at a support level, most investors place a long-term stop loss below this level.
* Trailing stop: A trailing stop refers to how the stop-loss order moves when the trade is in the expected direction.
If the market is reversing, you want to take profits.
There are many ways to track risk, but the most common indicators are moving averages, Relative Strength Index (RSI), and Average True Range (ATR).
* Profit target: The profit target is the area where the trader will maximize the benefit from the trade profits.
Profit targets should be asymmetrical in terms of risk-reward ratios, meaning that potential gains will outweigh the risks.
