If you don’t risk much, you can’t lose much

One of the biggest mistakes you can make as a trader is have too much money on any one trade.

The more money you risk, the stronger your emotional swings will be, a bit like pouring fuel onto a fire.  Ultimately you are sure to get burned…maybe even so badly that there is no way back.

Most new traders put too much hope into the quick win.  Experienced traders know better.  Good traders who are consistently profitable will risk only a tiny amount of their trading capital on any one trade, usually only 1 or 2% only.

Overconfidence is the other cause of excessive risk.  You know, those set up’s that are sure thing trades.  So much so that you are willing to gamble 50% of your capital on it.  Only thing is, that sure thing trade does not exist and therefore the market hardly ever cooperates. Below is a classic quote about overconfidence:

“This vessel could be cut in halves and each half would remain afloat almost indefinitely. The non-sinkable vessel has been reached in this wonderful craft.”  Edward J. Smith, Captain, RMS Titanic, 1912

So don’t get overconfident and only risk a tiny amount on each trade.  You’ll be more relaxed, and more able to execute whatever system you are using flawlessly.

May today be a profitable day…for all of us.

John