Risk Management For Day Traders: Rules for Success in Q4 2021

risk management for day traders

Keep having big losers wipe out weeks/months worth of gains? Winning trades turning into losers? Putting your stop loss in the wrong places?

Risk management is one of the biggest factors that determine your ability to be a profitable trader in the markets. Here are 6 must-watch video lessons to improve risk management for day traders and swing traders:

Don’t Give Back Profits Needlessly

Trading is a game where you can make AND lose a lot of money. A crucial trait of winning traders is their ability to hold on to the profits they make, and not give them back. Here is a video lesson from veteran trader Kunal Desai detailing how you can protect existing profits through aggressive risk management:

Combat Revenge Trading

One of the main causes of poor trading risk management is emotions after losing trades. It is normal to feel emotional after losing money. But you cannot these emotions result in you forcing trades on subpar setups. Revenge trading almost always results in you making a red day even worse. Here is how you can combat revenge trading:

Keeping Losses Small to Stay in The Game

There are days where you will have losing trades. But if you remain level-headed and keep those losses small, you can get your PNL back into the green if you capitalize on other opportunities. Here are some tips for going green on the day after a few losing day trades:

Trade, Don’t Gamble

In order to succeed in trading, you have to trade and execute a strategy with an edge. Doing anything else outside of a rigid system is just gambling. Here are some tips to combat the urge to gamble when you trade:

Go For Quality, Not Quantity

When you have a sound risk vs reward ratio on your trades, you don’t need a great win percentage to be a profitable trader. The better your risk vs reward ratio, the less you need to worry about having a high win percentage to make money. Here are some tips from Paul about how to maintain a strong risk vs reward ratio on your trades:

Use Hard Stop Losses

Sound risk management in trading requires a stop loss. You need to always have an exit strategy if a trade goes against you. Some people use mental stop losses, meaning they take themselves out of the market when they get their exit signal, and others use a hard stop loss, meaning they have an automated exit strategy. Here are the pros and cons of using both:

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