Why risk management is so important ? - page 4.

carter34

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Quote from: cassavachips on May 09, 2020, 11:15:28 AM

It is so difficult to recover lost capital from losses, profits will not always be greater than losses.

Really so you mean this? Why do people keep on trading then if profit will not always be greater than losses. Hey... People are making more profit than losses, you have to learn better ways to make better profit.

stomachgrowls

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Quote from: TheUltraElite on May 19, 2020, 12:19:37 AM

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I have never see any trader that treats trading as gambling that succeed. Risk management allow you to treat trading as business.

To some extent trading needs speculation. The options and futures markets are more or less a gamble even if you are doing Technical analysis every day and night. Spot trading is not gambling though.

Risk management depends upon how you diversify the assets being put into a portfolio into different risk classes. A high risk portfolio has the chance of making a higher return. So it dynamic thing to keep weighing out assets based on cost benefit ratios thus not everyone's cup of tea, better done by fund managers.

Risk:Reward as we all know and thats the time on when risk management would really takes place where you do analyze on what are the better steps that you should take as long
it would turn out to be beneficial for you in the end of the line then that would be the thing to be select on.This would take lots of trial and errors and a specific span of time.

Quote from: Ararbermas on May 19, 2020, 01:07:06 AM

Patience and trust in the investment is the real key not just risky management in my opinion . Because it would be useless to do such thing always especially in some sort of investing wherein unpredictable, such how long will last and the potential just gain even small profits. .for me much better to make a risky management in some legitimate projects to assure there's a better income after all the efforts you put in it. Just saying. Grin

Patience and trust are really needed but you should be wise too on when you should cut of this thing for you to avoid further loss since not all that youve

patiently waited would really result into positive.Therefore, its still a gamble if you do wait up for too long into something which isnt really that worth.
So this do still involved risk management in the end of the day.

Ararbermas

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Patience and trust in the investment is the real key not just risky management in my opinion . Because it would be useless to do such thing always especially in some sort of investing wherein unpredictable, such how long will last and the potential just gain even small profits. .for me much better to make a risky management in some legitimate projects to assure there's a better income after all the efforts you put in it. Just saying. Grin

TheUltraElite

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So anyway, I applied as a merit source :)

Quote from: okala on May 09, 2020, 03:07:09 PM

Risk management is the backbone of every successful trading plan.

Most retail investors dont do it though. Then when the market goes bearish then start to panic unless they are already have been through bearish terms previously.

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I have never see any trader that treats trading as gambling that succeed. Risk management allow you to treat trading as business.

To some extent trading needs speculation. The options and futures markets are more or less a gamble even if you are doing Technical analysis every day and night. Spot trading is not gambling though.

Risk management depends upon how you diversify the assets being put into a portfolio into different risk classes. A high risk portfolio has the chance of making a higher return. So it dynamic thing to keep weighing out assets based on cost benefit ratios thus not everyone's cup of tea, better done by fund managers.

Mahanton

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Quote from: abel1337 on May 09, 2020, 04:35:16 PM

Quote from: okala on May 09, 2020, 03:07:09 PM

Risk management is the backbone of every successful trading plan. I have never see any trader that treats trading as gambling that succeed. Risk management allow you to treat trading as business.

Right! Not by just trader but every professional should have risk management because risk management can greatly help you in different situations. You can bypass some questions in your mind on what to do next when something unexpected happened.

New traders should have risk management skills and engrave it into their minds because this is what every person need especially in trading.

Everything should really have that back up plan incase some scenario would be faced up or shall we called "Plan B".Risk management do really play a big important role not only on trading or into any investment things you are involved into.

This will help out on how you should set up a particular amount of risk for a specific target or goal that you are trying to achieve.If failed then you should do adjustments, it will really be a fight of
trial and error, until you do make yourself get used to it and gained up experience along the way.

shield132

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Every medal has two sides and for every action, there is an equal and opposite reaction. Of course everything has risk and trading isn't exception but when you trade, pros have to outweigh cons. But...

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It's harder to recover losses than to preserve funds.

Task isn't that simple. Sometimes for some people loss causes more reward in their brain, so as a result person tries his/her best to overcome this loses and tries to minimize mistakes. Loss can become a motivation of success.

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Think of how much you can lose on a trade.

I guess that alone isn't a good advice. You need some optimism and luck during trading along other major things. So if you already think about loses, then you will never be able to risk much and those who doesn't risk, don't get reward.

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Also win % does not make a successful trader, but strategy and risk management do.

In any way trading is strategy cause you have to calculate best time to sell and buy. On long term if your win % is higher, in any way you are good trader (call it luck or not).

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Quote from: okala on May 09, 2020, 03:07:09 PM

Risk management is the backbone of every successful trading plan. I have never see any trader that treats trading as gambling that succeed. Risk management allow you to treat trading as business.

Right! Not by just trader but every professional should have risk management because risk management can greatly help you in different situations. You can bypass some questions in your mind on what to do next when something unexpected happened.

New traders should have risk management skills and engrave it into their minds because this is what every person need especially in trading.

bigcash2011

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Well, i think money management and risk management are the basics for a successful and long term trader without them the trader will lose the capital sooner or later, and the key to this is using stop loss and also never trade with more than 5 percent of your capital at a time. Proper strategy with risk management will make you successful. Also if you are relatively new to trading do not try leverage trading you will lose your funds faster than you can think.

okala

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Risk management is the backbone of every successful trading plan. I have never see any trader that treats trading as gambling that succeed. Risk management allow you to treat trading as business.

BitcoinTurk

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Managing your risk threshold and performing transactions accordingly is a very difficult thing for every investor, because the next day he needs to earn approximately 11% more of the loss the next day in order to earn the amount he loses. For example, if an investor who lost 5% today will earn 5.56% tomorrow, it will reach the amount of the main currency again. For this reason, we should set the risk threshold well and take action accordingly. On the other hand, I would like to point out that in addition, it is never proportional to 5% gain happiness and 5% loss sadness. For this reason, you should always determine yourself at least 1.5-2% more than your lost cause. Your percentage of earnings should always be higher than the percentage of loss.

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It's very important that you know how to asses the risk and that you are aware what potential loss you can take. Otherwise you might find yourself in troubled situation and generate too much losses that you can't handle.
Unfortunately, not all traders are aware the risk enough or they simply ignore it thinking they will be lucky enough.
But luck doesn't have anything to do with risk and you can't make profit all the time.

cassavachips

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This is simple, but many traders ignore this, because if you already know the benefits of controlling the ego and patience will be difficult. It is so difficult to recover lost capital from losses, profits will not always be greater than losses.

MCobian

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According to some people risk management seems complicated, so decide not to do risk management. Including me personally
is not too comfortable when trading applies risk management, it's easier to focus on the percentage of profit. Although it is
a bit risky, but the reality until now going well. So in conclusion everyone has their own way of trading, using risk management or not.
It's just a matter of taste. Just do it according to each person's beliefs, because using risk management is not certain to succeed too.

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It's important because trade is like a gambling game. and gamble games often hit the emotions and psychology of many players. So no matter how broad your knowledge is without your capital management skills, you'll soon be out of this game. The market fluctuates unpredictably so capital management is very important. When you lose continuously, the market is not really supporting you. Take a break and wait for a good time to start again.
If you want to find the best method, maybe I would suggest reading about Dr. Elder's capital management method.

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If you cannot manage the risk, you will lose your money sooner or later. So if you want to trade, you should have a plan on how much money you will use in trading so you can avoid the worst thing that can happen in the market. It's about how you manage your money in trading, so when you choose to use all of your money, your risk will be bigger.

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Quote from: Harlot on May 01, 2020, 12:24:27 PM

Quote from: Lasky366 on May 01, 2020, 03:52:16 AM

One trader has a 60% win rate but his portfolio is down 6% using a 2/1 risk-reward.

Another trader has a 30% win rate but his portfolio is up 12% using a 1/5 risk-reward.

So, it’s necessary to have very strict rules on risk management that help you to always preserve the capital and not to take crazy risks.

Is a "win rate" really such a thing in crypto trading? From what I know a win rate is something being used by those odd pickers in gambling but not in trading because there is no such thing as a win rate for a trader since the market is to volatile to guarantee such trader being accurate in the market. Risk management is also barely used in the trading lingo but I believ what you are trying to say when risk management is involved is the cutting of losses of a trader to the bare minimum. In your example where the trader have lost 15% of his capital this can be something mitigated or avoided if the trader react way earlier or has a back up plan/ exit strategy when the target price failed to hold, maybe losing only up to 5% is what you will be looking for if you are trying to manage your risk.

Everyone in trading knows that risk management is necessary to prevent losses that can affect your mental health. We all know that when it comes to money, we should make good decisions and execute strategies carefully so that we do not fail when we are having transactions. Always be mindful and aware of the market because that will serve us your basis and also be patient.

In trading, technical analysis will keep you on track about how market moves and your strategies will based on that, by doing that, you should consider the risk the you will take and minimize it as soon as possible.

Minimizing the risk of getting losses in trading will keep you healthy in you trading career so that you can recover easily the money that you've lost. Avoid having a mindset that YOLO in your trading career, that is not applicable in any circumstances most especially if it involves money and cryptocurrency in the market.

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So anyway, I applied as a merit source :)

Quote from: Gozie51 on May 01, 2020, 09:03:31 AM

Capital management is what is simply called risk management, this is for newbie to understand.

Capital management is how you manage your capital or your principal amount that you are willing to invest, or how you manage incoming capital with every earning. Risk management is how you diversify your assets and reduce/increase them in terms of their projected losses/gains respectively. All this comes with a lot of predictions and foreseeing of the future economies and technology development as to what asset one should hold or should exit from.

It is not something like sports betting like the OP seems to say, but needs analysis and a lot of willpower to stick to.

wozzek23

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Risk management is very important in everything we do. If you decide to jump into cryptocurrency due to your passion you have for it or because of stories you were told, and without accessing your level of risk, you might just end up losing everything you have. I have seen stories of a lot of people that didn’t manage their money properly and ended up doing the wrong things on cryptocurrency and losing their money. And like I said at first, risk management is important in every level or whatever you’re into.

I also can remember a man who sold everything he had, just to get into cryptocurrency, and another young man that did the same. What if the price should fall through out the year just like in 2018 and you end up losing the money you invested?

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good advice. however, everything before trading needs to be considered. I have also experienced this when the price of coins goes down, then rises, but the total funds that I have do not return 100%. however, many people are not aware of this and continue to trade. knowing this makes us aware of how to keep making the best decisions in trading to minimize risk.

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Quote from: Yamifoud on May 01, 2020, 05:55:52 PM

The situation seems so harsh and it really changing the mindset of the people when they got lose of their money. And if they couldn't manage and control themselves then have to expect bad decisions comes.
Some people just underestimate the risk in trading because they are brag about focusing on the gains and out of knowing how much they lose in every single mistake they do. Not really they appreciate how was important to have an Effective Risk Management until they realize it. And that was bad since they have to commit mistakes first before they look into its importance.

We make mistakes on our first try but if you’re dedicated to earn money then you should use that mistake to learn for the important things, having the right mindset and knowledge. The market is so risky, without proper risk management you can easily lose money, but hopefully we study first before we do trading and analyze the situation and that’s the best way to minimize the risk and maximize your possible income.

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