How do you manage risks?
One of the most crucial trading-related topics you will ever read is risk management.
Why is it crucial? Well, since we are in the business of producing money, we must understand how to control risk (possible losses).
Ironically, one of the most underutilized aspects of trading is this.
Many forex traders simply want to start trading as soon as possible and don’t give their entire account size any thought.
They simply select the “trade” button after deciding how much they can stand to lose in a single deal.
This kind of investing has a name, and that name is GAMBLING!
Trading without following risk management guidelines is actually gambling.
You are not considering your investment’s long-term return. Instead, all you’re interested in is finding that “jackpot.”
Rules for risk management will not only keep you safe, but they may also turn out to be highly rewarding for you in the long term. Consider this example if you don’t trust us and you think that “gambling” is a means to become wealthy:
Many people do win enormous jackpots when they wager their money in Las Vegas, which is something that happens frequently.
In light of the fact that numerous people are winning jackpots, how on earth are casinos still profitable?
The short answer is that casinos are successful even when jackpots are won because they make more money from those who lose than they do from those who do.
That is the origin of the expression “The house always wins.”
Actually, casinos are just extremely wealthy statisticians. They are aware that in the long run, they and not the gamblers will benefit financially.
The casinos are aware that even if Joe Schmoe wins a $100,000 jackpot at a slot machine, there will be hundreds of other players who DO NOT win that jackpot, and the money will simply return to the casinos’ coffers.
This is a prime illustration of how statisticians profit at the expense of gamblers. Despite the fact that both lose money, the statistician—in this example, the casino—knows how to manage its losses.
Forex trading is ultimately a numbers game, thus you must slant every possible circumstance in your advantage.
In casinos, the house advantage is occasionally only 5% more than the player edge. But that 5% makes the difference between winning and losing.
Because you want to “Be the winner in the long run,” you want to be the wealthy statistician rather than the gambler.
So how can you stop being a loser and start being this wealthy statistician? Go on reading!