Risk management or money management is the most essential element of trading. If you take trades with aggressive steps and try to earn money aiming for a big profit, you will be losing trades most of the time. Having the ability to deal with losing trades and trying to earn more money is the most important step to take in trading. If you take your time and focus on the core concepts of trading, you will slowly learn that trading is not that difficult.
No matter which trading method you use, you have to focus on the core concept of money management. By using the risk management rule, the traders are able to scale up the trades. Though it will seem a bit more complex at the initial stage once you read this article, you will know how to deal with the variable risk management policy.
Variable risk management policy
Everyone thinks taking a 2% risk is fair enough to make money at trading. People don’t have the ability to deal with the losing trades and they always take high risk. But if you take the time and focus on the core concept of trading, you will learn to deal with managed risk. Things might seem a little bit complicated but once you learn to deal with the risk factor, you will be able to change your life. So, what is the variable risk management policy? This is nothing but taking a different percentage risk in each trade. Depending on the nature and the quality of the trade, you need to determine the risk exposure.
Helps you to earn more money
If you start taking the trades with a variable risk management policy, you will be able to manage the risk in a more efficient way. Things might seem very difficult at the initial stage but once you learn to take the trades with discipline, you will be able to change your life. Think this as your business and focus on long term goals. Find more info about the elite broker and open a low leverage account. Instead of risking a fixed 2% risk, take 1-3% risk in each trade. So, how can we determine the risk exposure for different trades? Well, we need to focus on the core concept of our trading strategy. Based on the quality of the trade setup, we need to determine which trade will have high risk and which one will have a low-risk factor.
Take a high risk for the long term trades
If you are trying to make money in the long run, you can take high risk. Taking small risks in the trades and trying to earn money by holding on to the position for months is too conservative. It is safe to assume that you can take 3% (as a maximum) when the trades are taken in a higher time frame. Never try to boost the profit factor by taking the trades in an aggressive way. Follow the basic protocols and try to limit the risk exposure in a very effective way. Take your time and try to focus on the long term goals. You should not try to focus on an aggressive method because it will make the trading process much more complex. Follow the basic protocols of trading.
Trade with discipline
You should be taking the trades with discipline breaking the rules and trying to earn a huge profit without following the standard rules of money management is one of the key rules to lose money. You might have an excellent risk management policy, but without following the rules, it will be tough to make money in trading. Follow the basic guidelines and take trades with managed risk. Forget the fact that you are taking trades with aggression. Stop making things overly complex and stick to your long term goals to become the best trader you can be.