MoneyMunch

If You Don’t Spend Much, You Can’t Lose Much

One of the biggest mistakes you can make as a trade is have too much money riding on a trade.

The more money you use the more emotional fuel you are pouring onto the fire. Eventually, you are likely to be burned… badly. And the post-traumatic stress may be irreparable.

Most beginning traders stake too much in the hope of a quick win. Experienced traders know better.

In day trading, where the traders can come thick and fast, a few big losers can eat you alive very quickly.

Good day traders who survive will risk only a tiny amount of their capital on any one trade.

If you’re “under capitalized” then consider using a trading system which offers a tight stop loss.

Alternatively, trade a shorter time-frame, like the 1-minute chart, where losses can be maximized.

Overconfidence is the other cause of excessive risk.

“Hey… heads has come up 10 times in a row… let’s put half the trading capital on tails (which is sure to come up next) and clean up.”

The problem with sure-thing trades is that:

A) The market hardly ever obliges;

B) Everyone else sees them as sure-things as well and jumps aboard. So when they go wrong, they go wrong big-time.

Risk a tiny amount on each trade. You’ll be more relaxed, and more able to execute the trade properly.

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