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Risk Management.
Risk Management.
Risk management is a crucial concept when trading on financial markets. When investing and trading, you need to know, use, and apply at least the basics of risk management techniques because the main attribute of any transaction made on the financial markets is its inherent risk. RISK is the only guarantee!
A competent, adequate, and professional risk management strategy makes it possible to avoid losing all the invested capital even if the market predictions are valid. To be a successful trader, you must learn how to assess the risks, mitigate, manage, and reduce the effects of adverse scenarios. Only if you follow such a, the invested capital will not only be saved but also multiplied. Look at the tools below and understand why risk management is so important.
Basics of Risk Management. Principles.
Tools
Stop-Loss (S/L) – this order is designed to close positions automatically at a given price. Stop-Loss is a protective mechanism for the trading capital of a trader in the case when the transaction moves in an unprofitable direction.
Take Profit (P/L) – is the price level set in the order; upon reaching it, the open trade automatically closes with a profit.
Buy Stop –a pending order to buy at a price above the current market price level.
Sell Stop – a pending order to sell at a price below the current price level.
Buy Limit –a pending order to buy at a price below the present rate level. It is exhibited in the expectation that the market price will fall to a specific level and then begin to grow.
Sell Limit – a pending order to sell at a price above the current price level. It is exhibited in the expectation that the market price will rise to a specific rate and then begin to fall.