Risk Management

There are several reasons why a trading strategy or settings may fail. For example, a trader may lose money because the market moves against the position of futures contracts or because players are influenced by emotions and sell assets out of panic.

Emotional reactions often serve as a reason for traders to deviate from their original strategy. This is especially noticeable during periods of bear markets and capitulation periods.

Most participants in financial markets agree that having a proper risk management strategy significantly contributes to their success. In practice, this can be as simple as setting Stop-Loss or Take-Profit orders.

A reliable trading strategy should provide a clear pool of possible moves, meaning that the trader will be better prepared for all possible situations. As mentioned earlier, there are many ways to manage risks. Ideally, the strategy should be continuously reviewed and adapted to the state of the market.