8 Risk Management Tips from the World’s Top Traders
In trading, many traders think that the most essential skill you may acquire is making more money, when in reality, as professional traders say, it is not losing what you already have. Even Warren Buffett, who is a world famous investor and the 3rd richest man in the world , thinks that your number one rule as a trader is to never lose money.
In this article we collected 8 tips of popular investors which may help you in order to better understand how to control your losses and take a closer look at financial risks. This knowledge is essential because it can help you stay in the game when everything appear to be against you, since as you already know, you may lose all your funds and trading might end for you.
According to Paul Tudor Jones, he usually thinks about losses, rather than making money. Jones suggests not to concentrate on making money and better concentrate on securing what you already have.
Ed Seykota believes that good trading contains of cutting losses. So if you will manage doing that, you can have a chance.
Mark Weinstein says that it is important to learn how to lose and that is is more crucial than learning how to win.
Bill Lipschutz believe that traders cannot always win if they believe that they will be right in more than 50% of the time, instead traders should understand how to make money and being right in only 20-30% of the cases.
Larry Hite states that during his career, he saw many people failed because they underestimated the risk. Thus, everyone should consider the risk.
William O’Neil says that the most crucial mistake investors make is they let losses happen.
According to Randy McKay, that if traders get losses while trading on the specific market, they better exit, because staying in this market can worsen their position
Marty Schwartz believes that if you trade and you realise that you win, it is good, but if you understand that you will lose money, you should better exit the market in order to save your money.
The tips mentioned above might be frightening however it is essential to understand the concept of controlling the risk. Many experienced traders state that it is highly crucial. In order to implement this concept in trading, you can, for instance, place no more than 2% of your whole trading capital to each tarde and close loss-making deals.