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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The Moneymunch editorial staff is a team of experienced financial writers and analysts with over a decade of experience in the financial markets. They have previously contributed to popular financial blogs and newspapers, and are passionate about providing accurate and up-to-date information to help both investors and traders make informed decisions. Trust the Moneymunch editorial staff to provide reliable and effective financial advice that can help you achieve your financial goals.

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