http://www.netpicks.com/risk-managment-trading/ - Read more Why should you bother with risk management in your trading career? Because focusing on risk management can be a complete game changer to your portfolio especially when it applies to position sizing. The numbers do not lie; Fail to respect risk % and position sizing and you will have a short lived trading career. For those of you that have been trading for a while, you may already understand how vital managing your risk is. For the new trader, this is something you must understand long before you worry about mastering any trading system or, more importantly, placing your very first trade. Even experienced traders should be constantly refreshing the basics and in this article, I am going to cover: 1. Why you should focus on risk management 2. How you can lessen the impact of losing streaks and draw downs 3. 3 steps to ensure proper risk management After fully understanding those, we are going to get practical with two important things you can do to enhance your chance of success: 4. How to calculate your position size 5. The simple step you can take so you never forget about risk - Visit our website: http://www.netpicks.com/ - Download the free indicator blueprint: http://www.netpicks.com/blueprint/ - Options Hot List PLUS Training: http://www.netpicks.com/hotlistdl/

2. Focusing on risk
management can
be a complete
game changer

3. The numbers do not lie

4. You may already
understand how vital
managing your risk is

5. Why you should
focus on risk
management

6. How you can lessen
the impact of losing
streaks/draw
downs

7. After fully
understanding those…

8. How to calculate
your position size

9. The simple step you
can take so you
never forget about
risk

10. RISK MANAGEMENT
IS YOUR FIRST JOB

11. The more risk, the
greater the potential
reward

12. Taking this principle to
its extreme has been
the downfall of many
inexperienced traders

14. The primary goal of
trading is to protect
the capital

15. Trading capital is the
lifeblood of your
trading business

16. One risk size
does not fit all

18. Trading is all about
your probability of
survival

23. These are losing
streaks, losing trades
in a row

24. Bad News

25. WINNING STREAKS/
LOSING STREAKS
COME IN A RANDOM
DISTRIBUTION

26. WWWWWLLWWW
WWLLLLLWLL

27. Think about the
different types of
trading systems

28. Trending

29. Channel

30. It's natural that
winners and losers
should come in
clusters

32. Once or twice a year
you will likely see one
of these eight to nine
trade losing streaks

33. CAN YOU RECOVER
FROM A STRING OF
LOSING TRADES?

35. Initial: $10,000
After Loss: $9,500
Need: 5.3% over that
$9,500 to get back to
$10,000

36. Account draws down 10%?
You need to make 11%
on remaining balance

37. 25%?
You need to make
33%

38. 50%?
You need to double
the size of your
remaining account

40. Consider a scenario
where on every trade
you are risking 5%
during the 1%
probability losing streak!

41. If your account has
gone down 40%, you
need to make 67%
on the remaining
balance!

42. What if you used a
lower risk %?

44. Your account is
eminently survivable

45. WHAT IS EFFECTIVE
RISK MANAGEMENT?

46. 1. RISK PER TRADE

47. 2. DAILY OR WEEKLY
CIRCUIT BREAKER

48. You will find that there
are days and weeks
when the markets are
simply not cooperating

49. Go back to that
probabilities table

50. You need to look at
this in terms of
recover-ability

51. Set the circuit breaker
large enough so that it
can accommodate the
normal fluctuations

52. If you're down 10% of
your account in one
day, you know that
you can recover
relatively easy

53. 3. MAXIMUM DRAW
DOWN YOU ARE
WILLING TO TAKE

54. You need to have in
mind a maximum
draw down level for
your total account

55. You have to redo your
homework

56. You must redo your
analysis

57. It's time to take a
fresh look at your
trading system &
consider changes to it

58. Consider changes to
the instruments you
are trading

59. Consider changes to
the time frames you
are trading

60. This will in all
likelihood be a
relatively large
number

62. How much?
How large?
How much of a loss will I
accept before reassessing
my trading business?

64. Determine your
average risk per trade

65. Let's assume in our
example that the
average losing trade
for your system is
$200 per trade.

71. account size
x
risk %
/
average loss
x
price per tick

72. We talked earlier
about 2% - 5% risk

75. With a 1% risk, you
can survive many
storms

76. The flip side of the 1%
risk is that you will not
be able to make as
much money on each
trade

77. You always have that
balance between how
much risk you are willing
to assume versus how
aggressively you want to
pursue gains

78. Failure to respect
risk will kill you

79. Resist the temptation
and focus on risk
management

81. 4 STEPS TO BEING A
RISK MANAGER

82. Before you trade,
decide how much
you're going to risk

83. Determine your circuit
breaker level

84. Determine your draw
down size

85. Write it all
down!
VITAL