How To Be A Successful Trader - Rule 4

Today I talk about the 4th rule of successful financial trading.

Rule 4: Correct Money Management

This means that you know the exact amount you can lose per trade you enter. So essentially it is the risk per trade. So, before you enter a trade you know the exact amount you could potentially lose if the market reverses and goes against you.

On average most traders tend to risk more capital than they can afford. By doing this, it means that their losses will be a lot higher, and it will be a lot harder to make profits in the long term. You have to find a happy medium where the stake is big enough to profit if the trade goes your way, and small enough to enough to accept a loss if the trade goes against you.

At LS Trader we tend to risk anything from 2% to 5% per trade depending on your portfolio type. Also another rule is that you can use larger stakes when the markets are working in your favour, so when you are going through good phases, you can use larger bets. Likewise when the market is going against you, you should use smaller bets.

Overall you have to be careful and correctly money manage your portfolio. You need to be sensible, and accept the losses when they come, and wait for the winners. You have to be patient, and to think long term.

Kind Regards

Robert Stewart