Why Risk Management is the only trading strategy you need to make money in the market?

Risk Management is the most important strategy you need to learn. I can say this after spending ten years as a full-time trader that comes with experiences like many blown accounts, learning new strategies that did not work. I meet with traders who are obsessed with learning new strategies that can give them maximum reward with minimum risk.

Traders need to understand that an amazing risk reward ratio comes with a bad probability of trade. Trading has three dimensions, Risk: Reward & Probability. If you go for high risk to reward trades it will always have a bad probability of winning. And it is said that you can die by a thousand paper cuts. The small losses accumulate and put huge dent on the health of your account.

Professional traders focus on high probability trades. In this process they manage risk by reducing their quantity (lot size). Trading is all about managing three dimensions in you favor to make money in a longer time.

I barely meet traders who have a lot of interest in learning trading psychology and Risk Management. The truth is, if you must master one area of trading then it is none other than risk management.

Only risk management can save you in the brutal trading world, no matter how good trader are you but if you are not good in risk management the account will be blown.

In FXCareers, we suggest following a ritual. The ritual is to decide in advance the max loss for the day, and for the week. Let’s take an example: Suppose Trader Jack has an account of 1000 USD. He is a day trader and loves to risk a significant amount of money to make a decent profit each day. His loss limit is 5 percent and 15 percent of the capital each day and week maximum. His win rate is decent like 60 percent, and he follows risk to reward ration 1 to 1.25.

He follows this rule and sticks with it no matter how greedy or fearful he is on any day. Overtime, his account avoids big drawdowns even when he hits losing streaks. His losses will be controlled, and winning trades will outpace losing trades.

As a FXCareers reader, I want you to use Chat GPT and do the calculations based on your own data and find out if your own Trading Strategy will be profitable in the long run? It is important to do the R&D before you begin trading or before you start following a strategy.

Every trader is unique, and they have to be unique to become an independent trader. FXCareers advises you to check with AI tool like ChatGPT to see if your trading strategy is profitable or not? Be honest with the data and emotions and you will get the right answer. Once you are confident about your strategy then follow it and print money.

Max Risk in a Day 5 percent of the total amount Max Risk in a Week 15 percent of the total amount