One of the key elements for successful trading is risk management. A trader who has earned substantial profits over period of time can lose it all in just one or two bad trades without a proper risk management.
While most retail traders go into a trade and immediately think about how much money they stand to make, the pros do the exact opposite. They ask “How much can I LOSE!” and this is critical to your trading mindset and becoming a more profitable trader.
To avoid being a gambler you must have a plan and trade according to that plan.
You could lose money even if you have a fairly consistent trading system and good profit target. This is primarily because of the percentage of account you risk per trade. To protect your account from losing, you need to have a keen insight of the three vital factors.
So there are three vital parameters that a trader should incorporate in his trading plan to have success.
- Risk/Reward Ratio
- Trading accuracy
- Risk Exposure per trade
Now with ActivTrades SMARTCALCULATOR allows you to quickly identify risk to reward of a potential trade, to simulate different trade scenarios by changing the leverage, or one of the Trade Info elements to understand your potential profit and loss, margin requirements, swaps and more.