Risk management
Before we get onto using orders to manage risk, let’s go over some risk management basics:
Take responsibility
The best long term risk management tool is you. You can not rely on anyone else to do your risk management for you. It is your money, it is your profit if you make it, so you own it.
Educate yourself
You wouldn’t expect to drive a car well without first taking some lessons or win a race without training hard – trading is no different. Trading is a skill so take the time to learn it.
Accept the risks are significant
When you accept the risks are significant you become prepared to start out slowly, use a practice account and when you do trade: trade with a plan.
Note: Pre-August 2018 a retail trader trading with an FCA regulated broker could lose more than they deposited. Now all EU brokers have negative balance protection, which means if their account goes negative it gets written off.
Trade with a plan
Every trade you place should fit within a clearly thought out trading plan. The plan details your strategy and fits your style.
Key Learning Points
- The best risk management tool is you, the trader.
- A good trader will plan, recognise the risks, educate themselves and take responsibility for their trading.
