Risk Management And Trade Criteria....#003
Is lack of risk management associated with failure in trading?
Well simply put yes, as the answer to the question. Many traders or all traders who do not apply risk management fail. No successful trader is able to accomplish his success without applying risk management.
Proper and effect risk management is paramount to ensure one is successful in trading and often when traders fail to do this they end up as failed traders.
When a trader fail to properly manage his risk exposure to the market they end up suffering losses that most times could be so large that they could never come back from it, some traders experience total financial breakdown yes financial ruin as a result of lack of effective risk management.
Well risk management involve making sure we only expose a fraction of our account capital for each trade to ensure no one trade has the potential to send one to oblivion.
It also means using stoploss in each of our position to protect our account incase our analysis is wrong but sad to say most traders neglect this hence the massive rate of failure in the trading industry.
Now the question is why really do traders neglect risk management?
Why Traders Neglect Risk Management
Well today I will be highlighting two reasons why traders often fail to apply risk management in their trading. Let's dive right in.
Overconfidence: Cockiness is one of the reasons why many neglect risk management, they are too confident, too cocky that they feel their father owns the market they feel they will never be wrong in their analysis.
This also often happens to the successful traders, because they have been able to accurately predict market movement in the past with a good degree of accuracy they eventually become over-confident in their skills.
They forget one thing, in here in trading past performance does not guarantee future success and no matter how good one is loss is one thing you can't run from so it's good you manage yours well so when it happens the impact will be minimal.
But overconfidence has led many neglect proper risk management causing them to expose their account thereby leading them to incur losses that could potentially lead to financial ruin.
Greed: This is also another contributing factor to lack of risk management, greed is inherent in man it is their nature only those who controls theirs could attain true success in any endeavor of life even in trading.
Most traders desire large returns and most often in a bid to get this quick gains they often neglect proper risk management just to see higher returns and ofcourse we know how that often ends.
Traders who are greedy risk more than they are supposed to and when their analysis is wrong it burns them and doe people who don't have any other financial backup or aid they may never recover from that.
It's viral traders let go of greed and control all the emotions to quickly get rich and follow the due process, good strategy and proper risk management if they want long lasting success.
Conclusion
The value of risk management can't be overly-emphasized as it's one of the major key for success in the trading industry and any who want to venture, it will be wise to apply effective risk management for sustainability.
https://twitter.com/frank_anayo/status/1717513494021456366?t=7_Q19K2XlfQCgtZtRv5oZA&s=19