Category: risk

Levels of Drawdown – Discussion of Risk to Reward This is something a new trader may not want to hear, but an important psychological part of trading is to understand that unless a trader has a big enough account to weather adverse market moves, the capital in one’s account should be considered risk capital. This…

A very important aspect to the psychology of trading is the ability to create and maintain a trading plan. As a famous saying in the market goes, ‘if you fail to plan, plan to fail.’ Planning is closely linked to the discipline of a trader. Experienced traders know that discipline and a trading methodology are…

Weathering Noise After opening the trade on based on a certain analysis and technical picture, price breaks in the opposite direction! Traders that use risk management techniques such as exposure per trade, are less likely to close a position at the first instance of the market swinging against them. A trader with a risk management…

Having Flexibility in Trading Strategies A trader should have some general flexibility in his or her approach in building equity depending on his or her successes and failures. Basically, there are several different approaches to sizing a position depending on total equity. There are sophisticated approaches and simple approaches. The simplest way is to use…

Creating and Maintaining a Traders Journal/Log In order to maintain a trading plan it is very important to create and keep a trading log. In it, a trader keeps notes and information about each trade they execute. The main pieces of information one needs to record in the journal are a time stamp of the…