🎁 Here’s Why You Need Proper Risk Management In Trading

Imagine there are two traders, Peter and kim. They both start with a $1,000 account. Peter is an aggressive trader and he risks $250 on each trade. Kim is a conservative trader and he risks $20 on each trade. Both adopt a trading strategy that wins 50% of the time with an average of 1:2 risk to reward. Over the next 8 trades, the outcomes are Lose Lose Lose Lose Win Win Win Win.

Here’s the outcome for Peter:

-$250 -$250 -$250 -$250 = BLOW UP

Here’s the outcome for Kim:

-$20 -$20 -$20 -$20 +$40 +$40 +$40 +$40 = +$80

Do you see the power of risk management? So here’s the deal: As a trader, you’ll encounter losses regularly. But with proper risk management, you can contain these losses till it feels like an “ant bite” 🍻