What is the Risk Management of Professional Traders?

  

What is the Risk Management of Professional Traders?

The one thing you can control is yourself, As a trader, you have the power either to give yourself money or to give your money to other traders.

-Mark Douglas

Risk management is the success mantra of professional traders, they risk the money they can afford to lose, while immature traders deploy all of their capital in a single trade. The big difference between the professional trader and the immature trader is that professional traders are ready to accept their losses when the market is against them, while novice traders hold their trade hoping that the trade will turn into profit.

 

What happens when you don’t book your loss?

Your mind will be stuck with false hope and eventually, your money gets stuck too. If you are willing to accept the loss you can go for the next opportunity, if you are holding your losing trade you cannot enter into the next opportunity. The market is not going anywhere. If you have capital, you can make money from upcoming opportunities, so be ready to accept the loss. Losses are part of this game.

You might have seen the P&L screenshots of professional traders, they are also losing money there is no golden strategy to win all the trades, professional traders losing small and winning big wins. As a trader, you have to accept the small loss. The small wins, small loses, big wins are the base of a successful trader.

 

what is the difference here?

Novice traders holding their losing trades and end up in a big loss, that is the problem.  You have to eliminate big losses, otherwise, you cannot survive in this market.

 

How to deploy Money?

Use only 30% of your capital in a single trade. Once you learn this skill you shall survive in the market for a long time. Follow this same method in every trade. If you deploy 50% or 100% of your capital in various trades the risk will not be the same, that is not an ideal approach if you are taking trading as a serious business. If you are serious about trading you have to go a long time in the market, follow a proper risk management system otherwise one day you will be out of the market.