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Thursday, November 27, 2008

Some Thoughts About Traders and Risk Managements

Some Thoughts About Traders and Risk Managements By Zhuge Liang

* What is a Trader? - If you ask a trader what is a good market, he will tell you that it's a market that has good volatility; a good market is one that moves. If you ask an investor what is a good market, he will tell you that it's a rising market. Lots of people try to succeed as traders with the mindset of investors. It doesn't work



* Risk Management - If you lose 10% of your trading account, you need to make 11.1% on the remaining capital to get back to even. If you lose 20% of your account, you need to make 25% on the remaining capital to return to breakeven. At a 30% loss, you have to make 37.5% to become whole; at 40% loss, you have to make 67% to return to even. Once you've lost half your trading capital, you need to double the remainder to replenish your account. Much of trading success is limiting losses and avoiding those fat tails of risk.

PLAN YOUR TRADE & TRADE YOUR PLAN

1 comment:

Ivan said...

That is true wo . ..

when lost 10%, we need more than 10% return to breakeven it due the capital leave is small compare with before. . (initial). ..

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