Risk management for day traders: rules of success in the 4th quarter of 2021


Bulls on Wall Street

Do you continue to have big losers wiping out weeks / months’ worth of winnings? Winning trades become losers? Are you putting your stop loss in the wrong places?

Risk management is one of the most important factors in determining your ability to be a profitable trader in the markets. Here are 6 video lessons you should definitely watch to improve risk management for day traders and swing traders:

Do not give back profits unnecessarily

Trading is a game where you can make AND lose a lot of money. A key characteristic of successful traders is their ability to hold onto the profits they have made and not return them. Here is a video lesson from veteran trader Kunal Desai detailing how you can protect existing profits through aggressive risk management:

Fight against trafficking in revenge

One of the main causes of poor trading risk management is emotions after losing trades. It is normal to feel emotional after losing money. But you can’t use these emotions to force you to trade with sub-par setups. Revenge trading almost always results in making a red day worse. How To Fight Revenge Trading:

Keep losses small to stay in the game

There are days when you will lose trades. But if you keep your level head and keep these losses low, you can get your PNL back into the green when you take advantage of other opportunities. Here are some tips on how to go green after some losing day trades in the day:

Act, not play

To be successful in trading, you need to trade and execute a strategy with an advantage. Doing anything else outside of a rigid system is just gambling. Here are some tips to help reduce the urge to gamble when trading:

Rely on quality, not quantity

If you have a solid risk / reward ratio for your trades, you don’t need a large profit percentage to be a profitable trader. The better your risk / reward ratio, the less you will have to worry about a high win ratio in order to make money. Here are some tips from Paul on how to maintain a strong risk / reward balance in your trades:

Use hard stop loss

Solid risk management in trading requires a stop loss. You must always have an exit strategy when a trade goes against you. Some people use mental stop loss, which means they take themselves out of the market when they get their exit signal, and others use a hard stop loss, which means they have an automated exit strategy. Here are the pros and cons of using both:

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