Top 5 Risk Management Rules Every Trader Must Follow
Risk management is the foundation of successful trading. These five rules keep you in the game.
Risk management
A stop loss that moves in your favour as the price moves, locking in gains while still allowing the trade room to run.
A trailing stop loss follows the price as the trade moves in your favour, but never moves backwards. Instead of a fixed stop at ₹790 on an SBI trade entered at ₹800, you might trail the stop ₹10 below the highest price reached. As SBI rises to ₹820, the stop moves to ₹810; if it then falls, you exit at ₹810 with a gain instead of watching a winner become a loser. Some brokers automate trailing stops within bracket orders; otherwise you move the stop manually at set points, such as below each new higher low on the chart. The trade-off is that a tight trail gets you out on ordinary pullbacks before the big move, while a loose trail gives back more. Trailing stops are one of the few ways to let profits run without guessing the top.
Risk management is the foundation of successful trading. These five rules keep you in the game.
VideoMargin is the money your broker blocks before it lets you trade. How much depends on whether you buy for delivery, trade intraday or take a futures or options position.
VideoLeverage makes a position bigger than your cash. The spread is the gap between the buy and sell price. One multiplies your results, the other quietly charges you on every trade.