Risk management in trading: what will help to save capital
Capital preservation plays a key role in the trading process in the financial market. Each of the traders should set an initial goal in the form of saving their money, and only then to earn on them. To ensure this, we need not only a stable psychological endurance, but also an integrated approach and the ability to work with a cash flow (http://www.investopedia.com/terms/c/cashflow.asp).
To start with, I want to figure out what the “money management” is. Most beginners misinterpret this concept, meaning only the volume control in the transactions to secure a mortgage in the fix apiforex brokerage company. However, it is not that way. This concept implies both control of the current transactions and possible future financial results for them. In the management of capital, the principles of risk management are also laid, and not just the money management. And this is important, because the trader must be keptin strict control, taking into account the possible losses or possible earnings. Thus, the capital management is a set of measures on the part of the manager that are required to regulate the maximum amount of the transaction, the maximum losses in the context of the entire deposit as a whole.
If you control the volume simply, then the risks are much more complicated, because the psychological factor with which the trailer is difficult to compete is included. Agree that each of us has ever been engaged in “transferring” the stop loss levels into a deeper loss with the hope that the value of the asset will unfold in our direction. But in the end we closed the deal with even more bigger loss.
Frankly, until I learned to control the risks, I did not earn with fix api trading. And personally the trading script helped me, the cows turned off all the transactions when the specified risk parameter or established risk was reached in one transaction. Moreover, the script did not allow me to open more deals when I reached the established limit. This helped me to regulate possible losses and consequences. I already knew how much I could lose and what I need to do so that this will not happen again.
Based on my experience, I want to share with you those tools that allowed me to control the risks in my fix api trading:
- Set the risks for each trade. This will allow you to know how much you can lose in the event of a stop loss operation and, of course, limit the maximum losses before opening a trading position.
- In addition, set the risks for the whole deposit. Personally, my parameter was 5% to the funds. And when I inserted 15 trading operations with a total loss of 5% (even if there were profitable trades), the program closed them.
- Block trading until the cause of the risk is clarified. Whether that was poor-quality analysis or trading strategy ineffectiveness, you need to know the cause, and then fight the consequences.
- Use the program. I already wrote above that I used the script for this because the limitation itself did not work based on my “psychologicalfeatures“. You can also order a program based on your risk and deposit parameters and agree with the developer that once a month you will update this data.
- Set goals not only for risks, but also for profitability. You can also set a goal for a day and a week or a month. When these yields are reached, you can stop trading until the next period. This will allow you to be in a tonus and spend more time on extracting new methods and models for predicting of the future value.
Of course, this is exactly what helped to control the risks in my fix api trading. However, I’m sure that these parameters will help you improve your results. If the issue of risks plays a primary role for you, then use trading robots that are capable of conducting risk-free trading, for example, the arbitration algorithm – http://forexzzz.com/product/forex-zzz-lock-arbitrage/