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Risk management in trading
There are hundreds of articles on risk management in trading on the internet that cover various aspects of it. I’m not going to repack the content that is available out there but focus on my view on risk in trading and my strategies for risk and exposure management. To begin with, let’s define what risk in trading actually is. For me the definition would be as follows: Risk is the probability of losing the capital. So, risk management involves working with probabilities and undertaking measures to reduce the probability of losing the capital. When considering risk in trading, we can speak of probabilities of losing the capital exposed during…
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Morning routines and trading results
A few days ago, I noticed that there is a strong correlation between the way I start my day / my morning routines and my trading results. If I start the day the right way, it usually ends with profit, and if I don’t, it usually ends in red or at break-even. This pattern repeated over and over, so I’m very happy that I finally noticed it. I immediately decided that from now on, I would be doing things the right way. So, here are the key differences: Losing day morning I get up too early or too late. I don’t know what to do with myself and wander around.…
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Trading for a living – what’s needed to make trading a stable source of income
When one is planning to open a company, the first step should be writing a business plan. Or at least its financial part, to see what it will take for the company to break even and then to be profitable. Correct me if I’m wrong, but when it comes to trading, we need to conduct a similar analysis to see if the „profit margin” on the „product” will be sufficient to cover all „costs” and generate net profit. In this article, I share my thoughts and methodology on the subject. And no, it is not another article on a trading plan and why you should have one. A trading plan…
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Five forex websites I use daily
With the abundance of financial websites and services for forex traders, one can get easily overwhelmed by all the information and opinions around. On top of that, there is constant distraction caused by the ads blinking in every corner possible and the risk of being exposed to content not relevant to your trades that might throw you out of emotional balance (like breaking news about accidents, crime, dramatic photos, etc.) Over the years, I followed each major financial website on the market for a while, especially websites for forex traders like fxstreet, dailyfx, etc., and I would like to share my opinion on what’s worth your time. But before we…
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Convictions, beliefs, and trading
Why at all think, talk, and write about things like convictions or beliefs in terms of trading? After all, trading is about making money, not psychology or some esoteric stuff. Is it really so? Isn’t it the trader that makes money? Or loses money, since according to statistics provided by brokers, around 70-90% of traders lose money. Traders are humans with their human flaws, traumas, and other psychological or emotional baggage that may influence trading. If we consider all this, a closer look at the trader’s mindset may lead to interesting discoveries and solutions to problems they encounter in their daily trading. Our convictions and beliefs may play a more…
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List of regulators worldwide
Regulators ensure that forex brokers follow the law and meet minimum requirements to secure clients’ funds (e.g., keep their money in a segregated bank account so that they can be refunded in case of a broker’s bankruptcy). Regulators also make sure that brokers can provide a secure and transparent trading environment for traders and have sufficient resources to facilitate trading. Choosing a forex broker regulated by a strong watchdog in a country that has a rigorous legal framework can provide traders with an added layer of protection and peace of mind. Countries and regulators known for their strict regulatory framework: Financial Conduct Authority (FCA) – UK Swiss Financial Market Supervisory…
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When not to trade – Situations which cause trading errors and mistakes
This article covers the situations which are not related to the market or the system, and yet affect trading. These are the potential contexts in which you shouldn’t really trade, because you will most likely make a trading error and lose money. It is part of my strategy series, for both new as well as more experienced traders. A strategy for trades and trading activities management in case of various situations that may occur in life should be a part of any trading plan. Or at least you should have a general protocol on what to do in different situations, to avoid trading under emotions and making mistakes. Some of…
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Risk management in trading
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System backtesting
Trading can be a complex and challenging endeavor, with all the variables and factors one has to consider when making trading decisions. Developing a system that can reliably generate profitable trades over time is the most crucial aspect of it. When working on a system, it is essential to engage in backtesting (testing a trading system using real market historical data) to evaluate its effectiveness and potential profitability. System backtesting is very important for various reasons. A day or two spent on backtesting can give preliminary knowledge of whether the system is profitable or not. It allows to check the effectiveness of a system without risking any real money. Backtesting…
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Risk management in trading
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Trader’s health and safety basics
As traders we have many things to look after, so we rarely think about how trading can influence our health. Especially at the beginning of a career, a trader has to cope both with technical and fundamental aspects of the market, and a full scope of feelings and emotions. No wonder, when in such conditions, one would not even think about such stuff as the ergonomics of a workspace, and work and safety principles. When one works at a company, these things are being taken care of by a health and safety officer, so there are not many occasions where one can acquire a habit of thinking and taking care…
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How to stay focused while trading
This text is also available as a podcast – click the play button above to listen. Staying focused and being in the flow is in my opinion crucial for success in trading. Such a state of mind allows us to be in sync with the markets and be able to see opportunities, as well as danger zones, which otherwise would be out of sight. Over the years, I discovered that limiting external stimuli while trading is the best policy you can implement, and it has a great influence on trading results. Of course, everyone is different and these are just my personal feelings and experiences, but giving them at least…
Forex – Trading – Freedom :: blog of a forex trader