Ignore at Your Own Peril Trading Edition |
Posted: October 29, 2021 |
A frequently ignored aspect when trading is good money management. The what and the when of trading are what most traders divert their attention to. The importance of what and when cannot be understated though what is more critically important is how to compartmentalize the funds properly to every single trade. A trading strategy revolves around the allocation of your capital. Whether the trader has one can spell success or disaster. To perceive dangers on the road to trading supremacy ahead, it is vital that a trader learns proper money management stratagem. 7 Dangers for foregoing a Money Management Plan1.All your earnt trading capital will be lost. [Maybe not all at once, but gradually]It is a general truth that in the CFD trading market, it is inevitable that you can lose more than when you started in your initial deposit. A trader gets kicked out of the market once the losses rack up consistently. It is paramount that a trader preserves his/her capital to maintain his/her participation in the market. 2.Cluelessness on the amount of money to set per position you enterOne size does not fit all. The same concept applies here. A trader must be aware of the nuances of the trade and adjust the risks accordingly based on the account size and the price volatility of the instrument/s he/she is trading. 3.Possessing the ‘one trade to financial freedom’ mentalityIt is when people build systems that achieve long-term success. Setting goals cannot be understated, however, its motivational pull is limited. Traders must clear this mindset if they truly want to be financially free. 4.Averaging down into losing tradesA martingale position sizing strategy or also known as averaging down is where a trader augments the size of his/her position as he/she is losing. This will drain the money out of a trader insidiously if done enough times and aggressively at that. A trading account’s eventual death is most commonly led by this. 5.Unaware of adding to winning tradesIf a trader wins, it would be a no-brainer to keep on winning. However, some traders fail to perceive that window. Cutting your losses short and allowing the profits to run - that is the main principle of trading. If you have a type of platform or system that capitalizes on this principle, then, by all means, do it! 6. Revenge tradingCFD trading with negative emotions is typically a bad thing. It is like making a promise when you are happy or making decisions when you are sad. It will never end well due to the cloudy judgment in your mind. 7.Retreating when on a losing streakIt is human nature to chase something that they think is theirs like in the cavemen era when cavemen would fight beasts when their clubs are taken by them. Same concept applies here: when a trader goes on a losing streak, they will keep trading until they win.
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