Secrets of Effective Money Management in India

You may already know that trading in financial markets is a high-risk business. However, this risk is completely manageable, and if you know how to deal with it, you can earn a stable income with no special efforts on our end. So let’s dive deeper into effective money management that “makes” money for you.

How to Keep Your Trading Assets Safe?

In addition to a profitable trading strategy, a trader should develop (and follow) an understandable money management system and competent risk management. The safety of your account depends on how well you work with the risks and their assessment. So once you perform the Olymptrade login in India, check what’s happening on the market, analyse the trends, and make a trading operation only afterwards.

Here are the main ingredients for an effective money management system:

⦁ Stop-loss — it must be set correctly, according to market requirements and your trading strategy. It will allow you to reduce your risk if your prediction turns out to be wrong or out of date;
⦁ The ratio of risk and reward in each trading position — as a rule, trading strategies provide for it at a level of 1:3 and higher. The minimum allowed ratio is 1:2; only in this case, the deal makes sense;
⦁ The volume of a trade entry — along with a stop-loss, it determines how much of your trading capital or a percentage of your trading account you risk on each trade;
⦁ Risk per position — based on the mathematical expectation of a trading strategy, it is necessary to decide what percentage will be the maximum risk in each transaction. The smaller it is, the safer your trade is;
⦁ An automatic program for risk management — it will allow you not to compromise your own money and risk management rules. The program will also help reduce the influence of the human factor.

It is necessary to take into account some fundamental concepts to select an effective risk management method:

⦁ never risk more money than the amount of equity capital allowed;
⦁ it is forbidden to upset the balance and risk a lot for the minimal stake;
⦁ there is a need to find ways to anticipate the consequences of potential risks constantly.

Today, you can meet traders who ignore these rules, considering calculating the risk as an unnecessary and burdensome activity. However, failure to comply with these rules leads to the fact that profits are reduced. As a result, a trader finds himself in emotional collapse. Violation of money management rules is the main reason for the failure of most novice traders. Non-systemic trading and neglect of the rules of a specific strategy — these two will hardly lead to the success of a trader. Without adhering to core money management principles, it is almost impossible to achieve success, regardless of the chosen trading strategy.