Different Ways to Follow in Order to Reduce Risk in Trading

As it’s said everywhere, ‘you need to do it if you want to win it’. It means risks need to be takes in life if you want to achieve it. In the world of trading, taking a risk is inevitable. Here are some of the ways explained by coingape.com the experts which can decrease your risk to get the comfortable, stress-free and profitable career in trading.

Overall exposure to risk

All of the open trades you have that comprises of risk combines creates the overall exposure of risk which means the cost that you are going to lose if all your trades gets stopped. If you find yourself awake in the middle of the night thinking about the open trades, reduce your exposure of risk until the trading is free from stress.

Risk per trade

This might seem to be the obvious one. However, most of the traders think they would have to risk what others have told them but no doubt risk is personal. One individual might be comfortable to take risk of 2% on a single trade, while another might only be happy with 0.5%.

Therefore, if you are risking for 2% but you are also considering the drawbacks that you are not comfortable with it, make sure to reduce it by 0.5-1%. There are some traders who even risk at 10% on a single trading account and this is eventually the fire way to blow away your account of trading.

Scaling in

Scaling in is everything about building your position as the price says in your favor. Therefore, instead of taking an easy trade of 2% at $106, you must consider taking 1% at $105 and $119. If the price gets reversed and proves you wrong after the first entry have been triggered, then you are going to lose half as much as you have got in 2%. You might also like to move your loss right close to the price as soon as the second position triggers. Further, this will reduce what you might lose.

Still, to be conservative, you can reach the 4 positions at 0.5% each. This is the better way to keep your risk low while letting your trades that perform the best getting the handsome profit.

Correlated markets

Correlates trading markets can add a lot of risk to your portfolio. You might remain in your percentage per trade along with the overall exposure, but all of those risks might come up in dollar currency or US equities. If everything will be against you, there are chances that all the positions in the correlated instruments are going to suffer.

If you want to avoid this happening, ensure to diversify. Make a rule and take nothing more than 4% in one currency or nothing more than 10% in all the equities.

Managing the risk is a major key

Getting comfortable and managing the downside is vital in trading. Keep the losses as small as you could.

Murarish

Founder/ Director of LTR Magazine - Tech Blog For Reviews.

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