Clarify Maximum Risk Per Trade

Cont'd discussion about website article entitled Replce Discipline

Another frequently occurring issue for trades is risking too much money on a single trade.

Who: You.

What: Risk only a specific sum of money in each trade and not more than that sum. For example, decide to make it clear that you will risk losing only $1,000 on each trade where the $1,000 is 1% of the money you have available for trading.

When: Every time you enter a trade.

Where: In any single trade.

How: First, calculate the cash value of the difference between your Initial Stop Price and your Entry Price. Then divide that number into the specific sum you want to risk in every trade, e,g, $1,000. That will give you the answer to how much volume to trade for any specific single trade.

Why: To avoid losing more of your money than you can survive losing. For example, decide that you can survive the loss in any single trade of 1% of all the money you have for trading.


...cont'd tomorrow...

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