Effective Risk Management Strategies for Full-time Traders

Effective Risk Management Strategies for Full-time Traders

Risk management strategies play a crucial role in minimizing financial losses in a trade. They can help a retailer to protect his account and investment. Without adopting risk management strategies, a retailer can lose all his money. Newbies often neglect these techniques because they think that making money from trading is very easy, which is not true.

Risk management strategies for full-time traders

This article will show you some strategies you can use to minimize the risks while trading.

  1. Planning the trades

Trading is like a battle which must be won before you enter the battlefield. This is why experts always advise beginners to adopt excellent planning. They state that every trader should plan their trade instead of jumping directly. Planning will determine whether you will succeed or fail. You can check here and read some important post by the Mena region traders. It will help you to take better trades.

Before making plans, the most important thing is to choose your broker carefully. Many brokers charge their customers a higher commission rate, but they don’t provide them with sufficient analytical tools. There are two points – Stop-loss and take-profit- which should be set to minimize the possible losses.

Many traders jump into trading without having a proper plan on how to deal with profit or loss. In these cases, emotions generally take space and control them to enter and exit a trade. Therefore, they make decisions based on their emotions and end up losing their investments.

  1. 1% rule consideration

The 1% rule is regarded as the rule of thumb, which suggests that no retailer should place over 1% of his money in a single trade. For instance, if you have $1,000 in your trading account, then you will place $10 for trading because the market is not certain, and it will take much more time to gather knowledge.

If you think that you can withstand the loss of 2%, then you can use $20 in the trade. Experienced traders have a higher balance in their trading account, but they always use a lower percentage while trading.

  1. Stop-loss and take-profit orders

Setting the stop-loss and take-profit order will determine the possibility to succeed or fail in a trade. Stop-loss order means when the market moves against your luck, the trade will stop as soon as it crosses your limit. On the other hand, the take-profit limit is a specific point at which a trader can sell stock and earn profit from the trade.

How can you set the stop-loss orders?

Setting the stop-loss and take-profit orders can be done by utilizing technical analysis. However, fundamental analysis plays a significant role in setting up the perfect timing. Technical analysis will help you to identify the support and resistance level. In contrast, the fundamental analysis will help you to analyze the market news and the condition of the world market.

You have to set the stop-loss points based on these analyses. If you can analyze the market properly, you can predict the next movement of the market. Based on your analysis, you can set your stop-loss limit.

  1. Calculating the anticipated return

If you want to calculate the possible return, you have to know the limits of your stop-loss and take-profit order. This calculation is essential because it will indicate the possibilities of your trade. A retailer can use the following formula –

[(Probability of profit) x (take profit %)] + [Probability of losing) x (stop-loss%)]

The result is regarded as the anticipated return for an FX trader.

  1. Don’t put all your eggs in one basket

This is one of the most beneficial risk management strategies. If you invest all of your money in trading, there will be a greater risk because if the market crashes suddenly, all of your efforts will be made in vain. That’s why expert traders advise diversifying the earning source and investments. In addition to this, it will create more opportunities.


These are the most effective risk management strategies that you can adopt to succeed and make a profit.