#TradingStrategyMistakes

Risk management remains one of the most crucial yet often neglected aspects of trading. Many traders focus solely on potential profits while ignoring possible losses.

The cardinal rule of never risking more than 2-3% of your trading capital on any single trade is frequently broken, especially during periods of market volatility or when trying to recover losses.

Successful traders understand that preservation of capital is paramount. They use stop-losses and some also guaranteed stop losses where the broker or counterparty guarantees a stop loss level. This means that the broker is taking on the stop loss risk of the trade, even if volatility reaches extremes and their stop loss in the underlying market is filled at a much worse level than that of their client. These guaranteed stop loss order therefore have a wider spread but a trader will only pay it if their trade gets stopped out.

Successful traders consistently us stop losses and avoid overleveraging their positions.

Risk management should include diversification across different markets and asset classes while maintaining appropriate position sizes.