Risk Management And Trade Criteria....#004
The issue of risk management is a very important one in trading which we know especially if we trade either on spot or futures that's why I have chosen to write on it.
Last time I showed why we could say lack of risk management is associated with failure I'm trading and highlighted some reasons why some traders neglect risk management.
On my last post on this important topic I showed clearly that greed and overconfidence to be one of the underlying factor why most traders neglect risk management, today I intend to continue from there and highlight other reasons.
Why Traders Neglect Risk Management
Alright hoping you're still with me esteemed readers I will like to quickly dive right into it.
Lack of Discipline: Discipline is an essential ingredients for success in trading, having a trading plan and risk management plan and following it rigidly almost like a robot.
Most times traders lose sight of this and are not disciplined enough to consistently follow the rules they have set themselves often leading to bitter end.
When a trader allows emotions such as fear or greed to take over him his logical thinking becomes clouded and he isn't able to make rational decisions anymore which comes at great consequences.
Lack of Knowledge: Lack of essential risk management knowledge often leads to mistake from people who are ignorant.
It's important before one begin his trading journey to be properly educated on the importance of risk management and other aspect of trading before deciding to risk live money.
Most times newbies who don't really grasp the import of risk management suffer greatly as they market makes them a meal every day.
Short-Term Focus: Another reason many neglect risk management is duly because of their mindset, what they expect from the market.
Many enter the market not for something that wish to do as a career or for a longtime but simply to make short gains and run off.
Now when traders do not want to be here for long or when they have a short term focus they easily disregard risk management as they feel it doesn't apply to them since they are not planning on staying for long which is still wrong and a bad approach to the market.
Underestimating Risk: It could also be that most traders haven't been around for long to see the market great capability to inflict great loss to those who ignore risk management hence they underestimate it.
Traders may underestimate the potential risks in the markets, believing that they won't experience significant losses.
Misjudging Volatility: Another reason why risk management is often neglected by traders is because they fail to take into account the volatile nature of the market.
When we misjudge the volatile nature of the market it could lead to us neglecting risk management or feel we have it under control until the market reverse in a violent swing and hands one his backside.
Conclusion
In this market which is crypto market it's always important we especially traders take note of some this reason's above that might lead them to neglect risk management and guard against it so that they will remain a long time in this space without suffering major heartbreak💔
Thanks for sharing about Risk management and trade criteria.
Kind of you to visit my post 🙂
A great post. I think one cannot over emphasize the importance of risk management for traders newbies or pros. Thanks for sharing
Grateful to see you like the content