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The way you have traded before has now changed, as losing your profits is becoming your key concern. After the first couple of trades, you get into a trading tilt, or maybe the cycle of doom, and Then you definitely go back to your regular trade size to regain confidence.
In this video, I explain why risk management is so important and why you should risk only a very small percentage of your account on Each and every trade. I hope you appreciate it!
If your stop loss is that close to price therefore you are risking one% of your account there is a significant risk of the position gapping through your stop and causing you a very large loss that could threaten the survival of your account. From More hints what I have seen stop losses that tight lead to your high percentage of losing trades and with many strategies you could actually make more money by widening your stop and taking smaller (and therefore less risky) positions.
Use percent risk position sizing within the long side when you have a fairly wide stop loss in a very trend following system.
You’ll see to the right-hand side a small number of very large winners. This is where the majority of your profits come from.
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For those who have a tight stop-loss with percent risk position sizing and it gaps against you, you’re in real trouble. In this situation, you’re going to have an enormous position going against you, losing more money than you anticipated.
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Additionally, hypothetical trading does not entail financial risk, and no hypothetical trading record can completely account to the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to your particular trading program Regardless of trading losses are material points which might also adversely affect actual trading results. There are numerous other factors related to your markets in general or to your implementation of any specific trading program which can't be fully accounted for while in the preparation of hypothetical performance results and all which can adversely affect trading results.
Now I don’t know about you, but I need to make sure that my account isn’t so sensitive or volatile to Anybody trade outcome.
Effective sources
www.marketwatch.com