Saturday, July 26, 2008

How to Ensure You Minimize Risk and Preserve Capital

The first and foremost thing you must think about when trading is to protect your capital and do whatever you can to ensure your risk is minimised to the utmost. If you can think in this frame of mind, rather than one of making money, you stand every chance of being a successful trader.

You have to educate yourself to become at ease with the aforementioned and that it should be your first consideration before you open a position. This may not be natural to you, but learn it you must. It really could save you a lot of worry and anxiety. Many including myself have been on the other end, and it's no fun I promise you.

What you will learn is that if you can preserve you capital, you will always have a trading budget for tomorrow. It certainly reaps the rewards to walk away from a position or trade that is too much of a risk

Spend a little time carefully weighing up that ratio of risk over reward, so that when you trade you plan - and you should have a plan - the ratio is comfortable for you. It's a good and crucial habit to form and will help you enormously to become a successful trader.

It is far better to let bad ten positions pass you by instead of taking a chance of allowing them to cause you grief. It's better to make one good trade than ten poor ones. For every trade you pass up on there will always be at least one other one just around the corner, always.

I cannot emphasize enough the importance of searching for every opportunity at every moment to reduce the risk of you budget. Please do not misunderstand me; far from trying or seeming to be putting you off, I just want to promote your safe trading. You're here to make money but not by taking unnecessary risks.