Today, we are going to talk about the trading risks, and not only about how we can calculate them, but also the issues which have a direct impact on observance of the money management rules by the newbies and experienced traders.
We will discuss which obstacles you may face on the way to reaching your goals and attaining financial freedom, which pull even the most experienced of us back.
We will find out how these obstacles can be overcome or prevented using a reliable and secure automatic software allowing the trader to manage the capital as efficiently and smoothly as possible.
In this article, each of you will find something useful. You will recognize your problem and we will address it together.
Needless to say, it is absolutely vital to be able to manage the trading capital correctly. Any trading strategy implies not only observance of entry and exit rules, but also risk management rules.
This is a basic premise for your trading capital security and successful, stable trading in the long run.
You are most likely aware of all this, but do you really observe these rules? What could be the problem?
Psychology has a huge impact on the risk management. First and foremost, we shall analyze the psychological aspect which may stand in your way to becoming an efficient trader.
|Fear of losses.It makes us try to bounce back while taking large, unreasonable risks.
|Only cold math and figures. There is no way you can lose your money beyond the fixed limit.
|Greed Which. A lot of people experience especially early on, when the trader comes into trading, wishing to earn a million right away, while having only 100 dollars.
|Search for more profitable trades. If you waste a trade, Risk Manager will not let you open it when the perfect opportunity comes around!
|Excitement. While losing self-control, the trader makes the deal after the deal, because he or she wishes to beat the market.
|Takes responsibility off you. Thus, no stress and tension.
|Overconfidence. «How is this possible? There is no way I can lose! I’ll show them what I’ve got now!». Meanwhile, the money is going down the drain.
|No emotional overtrading. The software simply blocks you, when you reach a specific daily trading limit.
|Anger, rage, frustration, despair. After a number of unprofitable trades, being overwhelmed by these emotions, the trader is unable to assess the situation rationally and stop when it’s needed.
|Helps to not lose profit and benefit. If you often get large Risk/Reward Ratio.
In our field, constant self-control is essential, since when it comes to money, we get hyped up and our various traits get awakened, leading to the same result which is the loss of money.
1. Fear of losses which pushes us to try to bounce back, remove or move protective orders, jump into unprofitable position hoping for the price reversal, while taking large and unreasonable risks.
2. The greed which many face with, especially early on, when the trader comes in trading, wishing to earn a million right away, while having only hundred dollars to begin with. This often leads to huge losses, rather than big profit.
Also, what about all the missed opportunities to earn? You seem to see them everywhere and, naturally, in order to remedy the situation, you believe that you have to quickly enter a position without calculating risks properly or an increased lot.
“Don't be concerned with the market moves you are not in.”
Anger, rage, frustration, despair after a number of unprofitable trades - all of these emotions lead to both violation of trading self-discipline and risks.
Now, how often does the overconfidence stop us from reaching the goal? When re-evaluating yourself as a trader, you can come to really sad conclusions! Can you relate to the thoughts going something like, “How is this possible? There is no way I can lose! I’ll show them what I’ve got now!” Meanwhile, the money is going down the drain in front of your very eyes.
"I'm only rich because I know when I'm wrong. I basically have survived by recognizing my mistakes."
George Soros, fortune worth $22 billion
How often do the traders make trades one after the other, having already lost self-control? More often than not, instead of the planned 2 to 3 trades on the account, ten and even more needless trades are being made. Why does this happen? Because you believe that you can beat the market!
Sadly enough, not many realize that the psychological factor contributes to 60 to 80 % of our failures and money losses, whether or not there is a stable and proficient trading system.
The first step in addressing this problem is admitting that you are no machine and accepting that you indeed have a certain "weakness" towards the market - for every person it manifests itself differently. Accept that you are not a robot and let the recently created robot handle the risks for you.
The Risk Manager is devoid of emotions, greed, and fear. Only cold math and figures. When you enable automatic risk management, there is no way you can lose the money beyond the fixed limit.
If an established loss limit is 1 %, it will be 1% no matter what you do. The service will not let you exceed it. You will get used to this soon enough, and your self-discipline will reach a whole new level.
Basically, you are no longer responsible for violation of the money management, which takes away all the stress and tension associated with this.
You will learn how to search for better trades! Why? That’s because you will know that if your trade goes to waste, the Risk Manager will simply not let you open it when a perfect opportunity comes around!
It will free you of emotional overtrading, too. The program blocks you, once you reach your daily trading limit. Blocking by the number of profitable trades - if you need it, of course - will help you save your profits.
After having earned a lot, some people manage to reach the daily loss limit right after. In case of unprofitable trading session, the Risk Manager’s blocking feature will help you to cool down and think about your next steps.
It will not let you lose your profit, if you often get a large Risk/Reward Ratio. If you overstay the position and lose everything, this feature is your best bet.
In addition, you will be able to stay in the black by locking the position by the rollback to a certain number of pips. If you have a bad habit of increasing the trade volume for no good reason, you can set a parameter which is going to limit the daily, weekly and monthly interest risk.
Another advantage offered by the service is that there are no expenditures connected with maintenance, i.e. you don’t need to maintain Virtual Private Server and hide its password from yourself so that you don’t fiddle with the settings.
The automated money management system is designed to ensure effortless capital management for the traders with any experience level.
You have to admit that it is very handy to simply preset all risk parameters and let the robot control the way you observe your very own rules. This will definitely help you stay more cool-headed when making trading decisions.
Risk Manager is a perfect solution for the investor as well. The investor can connect the RM to the account which was handed over under trust management or choose the TIMA account with a manager who uses automatic risk management which, in turns, proves how serious he or she is when it comes to saving the investment.
If someone thinks about disabling the service, you will still be given a whole day to cool down, which will prevent you from making any trading mistakes.
Using the service, you will be able to control your losses, which, in turn, will help you build a career of a professional and risk-free trader.
Also, there is another useful feature consisting in blocking the instruments that generate no profit for you, but you keep trying hard to trade them:
You can enable Risk Manager in your Personal Office on Gerchik & Co website in the Risk Manager tab. There, you will also find a setup manual and a clear explanation of all parameters and operating principles.
We hope that this article helped you get one step closer to turning the cherished dream into reality i.e. becoming professional and financially free trader.