Five easy steps to managing your risk profile at trading

There are many ways by which you can earn money in the investment industry. If you want to change your life, you need to be cautious about your trade execution steps. Most novice traders become greedy and try to execute the trades without following strict rules. Eventually, they trade with high risk and loses their capital. But to earn a consistent profit, a trader needs to follow strategic rules all the time.

Though their hundreds of ways to manage the risk profile at trading, we are going to highlight the most prominent ones. After reading this article, you should be able to trade with low risk and earn more money with less stress.

Risk 1% of your account balance

To keep your funds safe, you need to risk 1% of your account balance. Without risking more, you should feel more comfortable in the trading business. But if you trade the market with high risk and try to earn more, you will become frustrated with the few losing orders. Many novice traders often try to trade with high risk and make things worse. You should not trade the market with 2-3% risk also. Once you follow this rule strictly the overall trading process will become much easier.

Trade with the trend

Trend trading method is always preferred by the skilled traders at Saxo Bank. By trading with the key trend, you can significantly reduce the number of losing trades in the market. Though it will take some time to learn the trend trading process, it is worth knowing this technique. If you study the historic price movement, you will be surprised to know that most of the time, the price of the asset moves in favor of the existing trend. So, stop taking the trade against the trend as it will increase your risk profile and ruin your career.

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Use protective stop loss

The use of stop-loss is a must to protect your trading capital. If you fail to use the protective stop loss, you will always keep on losing money. You may say that you can close the trade manually but this will never work. To survive in the trading industry, you have set the stop loss right after the trade execution. The stop loss should place in such a way so that the overall risk exposure doesn’t exceed 1 % of your account balance. But remember, you should set the stop loss based on the support and resistance level. If you ignore this factor, you will be placing the stop at the wrong place and lose money from the profitable deals.

Evaluate the news data

Very few traders pay attention to the news data. Most of the time, they take the trades without evaluating the news factors. Thus they lose money and blame the market. Trading the market based on technical analysis is not the perfect way to make a profit in the financial industry. If you want to change your life, you must learn to evaluate the news data systematically. Follow the core rules of fundamental analysis and reduce your risk factor. At times, you might get confused due to massive price fluctuations during major news. Avoid taking the trades on such market conditions.

Chose a reliable broker

You might be wondering why we need to trade with a reliable broker. Without choosing a good broker, it is very hard to make consistent profits in the market. If you wish to trade like a pro trader, you must learn to evaluate the market data with the high-end platforms. And without choosing a good broker, you will never gain access to high-end trading platforms. So, take your time and learn to find a good broker. Unless you do that at the initial stage, you will also develop many bad habits. A good broker is a must to ensure quality trade executions.

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About the Author: Tad Fisher

Prone to fits of apathy. Music specialist. Extreme food enthusiast. Amateur problem solver.

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