I decided to implement some extra risk management into my trading. In the past I was donde with limiting my risk per position to 1% of my trading account. This allowed me to take small positions and thus take more positions at the same time. This in turn led to overtrading as I tried to capture every trade that catched my eye, even though it wasn't an optimal setup.
But then the inevitable happened. A losing streak and many of my multiple positions became loosers. So instead of having a big loss because of too much risk in a single position, I had a big loss because I had too much risk at the same time. Although the % loss of my account wasn't big, it had a psycological impact in me, seeing so many of your positions turn red and become losses.
So I decided to keep my maximum risk % of total trading account at 3%. This will usually mean that I will have a maximum of 3 positions at the same time. But when a position is clearly going to be a winner and on it's way to my profit target I might move my stop loss to break even and thus enabling me to take another position if the opportunity presents itself.
I know this little rule will help me keep a tighter risk control and avoid overtrading.
But then the inevitable happened. A losing streak and many of my multiple positions became loosers. So instead of having a big loss because of too much risk in a single position, I had a big loss because I had too much risk at the same time. Although the % loss of my account wasn't big, it had a psycological impact in me, seeing so many of your positions turn red and become losses.
So I decided to keep my maximum risk % of total trading account at 3%. This will usually mean that I will have a maximum of 3 positions at the same time. But when a position is clearly going to be a winner and on it's way to my profit target I might move my stop loss to break even and thus enabling me to take another position if the opportunity presents itself.
I know this little rule will help me keep a tighter risk control and avoid overtrading.
