Mistake of Money and Risk Management

All traders when they enter the world of trading have a profit goal or seek as much income as possible. However, in trading money management is very important. If the trader is correct in analyzing, but without money management, any good tactics or strategies will not guarantee trading continuity (long lasting in trading). The high probability of profit does not guarantee large profits and is not able to minimize risk.

In this article, we will discuss the mistakes in money management:

Messy Lot

In trading, traders apply different lots in trading depending on the confidence in the position the trader places. If you are sure of the probability, then you are ready for a loss. Therefore, traders must apply lots that are as large as the risk they will face. It aims to find out the size of the profit and loss. When a trader makes a profit in a small lot and a loss in a large lot, not only the portfolio is destroyed, the trader's psychology will also be destroyed.

Locking/Hedging

The traders will not be able to see the minus position, and then the trader will not survive but enter the opposite position. This will result in 2 minus positions that traders will see. This is because there are spreads and price movements that will exist between the two. Locking/hedging is also one of the surefire techniques for profit if you know the strategy.

Wrongly apply Risk

The ideal risk reward is 2:1, 2 for target profit and 1 for stop loss, not the other way around. So if the trader gets a profit opportunity from the analysis technique but the amount of the stoploss is bigger. Traders should keep these positions more or even better look for other trading opportunities.

Overtrade

When you just start trading, traders will definitely become addicted to trading and want to continue trading. In this position traders will look for trading opportunities with 1001 strategies that traders will learn or even subscribe to signals and want to trade all of them. In this position trading will be destroyed, because the trader is no longer able to monitor all transactions and money management is also unbalanced because there are too many positions.

Setting Money Management with Target

Having a target when trading is a good thing. However, in forex trading too focused on the target tends to be vulnerable. This is because traders will focus on pursuing targets only. the demands of pursuing the target actually started from an error in regulating money management.



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