Managing risk is important in every aspect of life, and investing & trading are no different. There will be good trades and bad trades so to ensure your capital keeps growing you will need:

1. A good Strategy to increase the likelihood of good trades
2. A plan in place to minimise the impact of bad ones

This should be suited to your targets and what you’re willing to lose in the pursuit of further gains. For example you may choose to risk 1% either by staking that much of your total capital, or staking more and placing your stop loss at the point of a 1% loss. Be sure to factor in the number of trades you will be doing, so you may choose to only accept a 0.1% loss allowing for 10 bad trades before reaching around 1%.

After any bad trade it's crucial to understand what went wrong, what lessons have been learnt, and any amendments that may be needed to the strategy. Don't rush in blindly trying to recover losses, wait for the correct conditions to enter again.

Watch the Chat With Traders podcast below on the importance of risk management and subscribe to the channel for valuable market insights: