Knowing the right risk management techniques is one of the easiest ways to ensure that a trader has a successful future in profitable trading.
Risk management is the process of identifying, analyzing and accepting (or then trying to reduce) the amount of risk a trade or investment will have.
This also ranks pretty low as a priority to most traders. But effective risk management is important if a trader wants to keep their gains over the long term. Keeping your losses to a minimum means losing less money in the end — and that’s good for your portfolio!
Typically, you’ll see day traders follow the 1% rule as a risk management technique. This rule means that the most amount of risk a trader is allowed to take for every trade is 1%.
Traders do this by choosing the size of their position so that their total amount of losses is only 1% by the time their stop-loss is triggered.
But let’s be real, some trades are going to require more risk than just 1%. This is the investment world — some risk is necessary for incredible gains. In order for everyday traders to get those desirable profits, they’ll need to know more than just one technique for managing risk.
Everyone loves talking about how much money they’re making with all their massive gains in the stock market
But no one ever wants to talk about risk management — the key to successful trading and investing.
Having inadequate risk management techniques (or none at all) has already proven disastrous for the economy: The 2007 mortgage meltdown that led into the Great Recession resulted from extremely poor decisions about risk.
Knowing the amount of risk you’re taking on in a trade is, without a doubt, the difference between winning and losing.
Former hedge fund insider Lance Ippolito likes to trade a lot. He actively trades every day and loves to hold a boatload of positions at once. But he only has two eyes. If he wants to keep enjoying his wealth (and feeding his cats), he needs to have proper risk management.
Check out the video below for the No.1 thing Lance does when it comes to managing his risk. We also want to hear your thoughts on proper risk management. Let us know in the comment section below what you do to manage your risk on trades.
P.S. We can’t stop thinking about these incredible trades about to take off in biotech this October and November…
Trades like these have been known to go up 350% in just 30 days! All while not risking a single penny of starting capital — that’s like quadrupling your money in a month…
And there is still time for you to get in on these trades.
Don’t waste any time!