Hunt for lower risk setups
Trading involves risk and the more you focus on hunting for lower risk setups , better it is . It reduces drawdowns, increases profits, and increases your ability to do more trades.
Risk= Entry-Stop
Some setups involve higher risk as your stop needs to be larger to account for breakout or higher volatility of underlying stock. One of the ways to reduce risk in these situations is to select stock with lower volatility. Or select to trade stock during lower volatility phases.
Entries also determine your risk. Confirmation entries have higher risk as you wait for price to confirm a breakout or trend. Anticipatory entries have lower risk.
Stop placement is also an art . Closer your stop to entry , better it is. But too close a stop is also counter productive. Using well designed stop strategies can reduce your risk significantly.
Over 20 years of trading I have progressively worked on reducing risk . 5 years ago my average per trade risk was over 5% now it is below 2.5%. In order to do that I have shifted more of my trading to setups that allow me to risk less than 2%.
If you can reduce risk significantly, you can do more trades and increase results dramatically.
Think about this. This kind of thinking is more useful to experienced traders as they have more opportunities to do this.
Risk= Entry-Stop
Some setups involve higher risk as your stop needs to be larger to account for breakout or higher volatility of underlying stock. One of the ways to reduce risk in these situations is to select stock with lower volatility. Or select to trade stock during lower volatility phases.
Entries also determine your risk. Confirmation entries have higher risk as you wait for price to confirm a breakout or trend. Anticipatory entries have lower risk.
Stop placement is also an art . Closer your stop to entry , better it is. But too close a stop is also counter productive. Using well designed stop strategies can reduce your risk significantly.
Over 20 years of trading I have progressively worked on reducing risk . 5 years ago my average per trade risk was over 5% now it is below 2.5%. In order to do that I have shifted more of my trading to setups that allow me to risk less than 2%.
If you can reduce risk significantly, you can do more trades and increase results dramatically.
Think about this. This kind of thinking is more useful to experienced traders as they have more opportunities to do this.
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