The concept of diversification is based on the concept that a trader can reduce his risk exposure by entering several positions at the same time. The success of a traders portfolio is therefore based on reducing risk rather than maximizing returns.
Two aspects of your trading system should be monitored one is your risk and the other one is the volatility. Effectively implement this strategy and reduce your portfolio swings. Incorporate the number of directional price changes into this equation and you can come up with even better models for position sizing.
How would you feel if your $100,000 portfolio went down to $90,000 in a single day ? How much heat can you handle pal ? Let’s have a look at how you can implement proper risk management in your trading system.
If one thing can be called the holy grail of trading or at least come close to it then its money management. Some people call it diversification while others call it how to wisely invest your hard-earned dollar.In simple words money management is the rule book that tells you how much of your money you should put at risk for a particular trade. We ar writing this post to give you an overall understanding of money management and how to use it for your trading strategies.