Risk Management

How To Improve Your Trading Performance?

I’m always thinking about losing money as opposed to making money.

– Paul Tudor Jones

If you’re like me, who doesn’t believe in luck or chance, you’ll find these articles on risk management both funny and exciting that how without being good in technical analysis or having a great sense of market direction, you can be profitable by creating an edge with a bit of common sense.

One of the most important parts of trading is risk management. We can be good at technical analysis by having a great sense of market direction, but unless we know the proper money management strategies, all of our knowledge is in vain. We can’t make consistent profits trading the markets without adequately managing the risks associated with every trade.

It doesn’t make sense of the profits you’re making as a trader if you’re losing significantly to your earnings. The only thing that matters in trading is whether you’re a consistent winner or not.

Any novice trader can outperform a veteran in a sample of two or five trades but increase that to above twenty, and you’ll see a gambler blowing out her entire account.

Trading is lucrative because it doesn’t demand any professional degree or specific intelligence. Neither does it require a skilled mindset nor talent. Any roadside Romeo can jump straight into the game and call himself an expert by winning a few trades based on luck or chance.

But as the sample size of trades increases, the novice discovers that trading is the most frustrating experience he has ever undergone in his life. At every move, there is an associated monetary cost. You can’t come out of the market without paying the penalty for your mistake.

So the holy grail to survive in this system is not to become better at technical analysis or rely on pure luck or chance. That’s gambling. The secret is to learn more and more about risk management to at least survive in the system to learn from your mistakes.

In upcoming articles, I’ll present a common-sense approach to trading based on risk management under my favorite subject of trading psychology. Till then, good luck and suitable trading.

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