Risk Management Is Your Trading Strategy
There’s no golden strategy, secret formula, or recipe for success in trading, besides effective risk management. No strategy works if risk management isn’t respected and adhered to religiously.
The Reality of Strategies
There are thousands of strategies to choose from, and many successful traders use different strategies to achieve positive and profitable results. However, mastering a strategy and backtesting it over many months and years is just the beginning.
The real key to success is surviving long enough in the trading world to determine if your strategy is effective. This requires continuous learning and adaptation, as well as a commitment to risk management.
Losses Are Inevitable
Regardless of the accuracy of your strategy, losses are an inevitable part of your trading journey. They will continue to occur throughout your trading career and cannot be avoided.
Some traders even experience more losses than wins and yet remain profitable in the long term. It only takes one significant loss to reset your progress back to zero. Understanding and accepting this inevitability is a key part of your resilience as a trader.
Risk Management Is the Strategy
Risk management isn’t just the key component of your strategy; it is the strategy. It’s the make-or-break force behind what makes a losing trader and a successful trader.
Aside from the glitz and glamour of social media trading, where traders often showcase their wins but rarely their losses, real trading encounters losses along the way, which cannot be avoided; they can only be limited by the damage and the impact they have on us.
You will lose, and you must accept this reality.
Why Losses Are Feared
Losses are feared in trading because your ego doesn’t like to be proven wrong. You want to be the superstar who can say they have an endless winning streak and have mastered the markets, but you never will.
Losses must be embraced. When you know they’re eventually coming, you learn not to take the chance of blowing your account when the unexpected arises.
The Market Machine Analogy
Imagine the markets as a machine which you put your money into. When you push a button, the machine generates a profit or a loss.
You’re able to put the odds in your favour over time by understanding how the machine operates, but it requires many months and years of testing to acquire enough data to formulate a plan.
Once enough data is acquired, you eventually learn to press the buttons at the correct time to shift the odds in your favour and generate more wins than losses.
The problem is that until you acquire this data, the outcome is random. This means that if you put all your money into the machine in one go, and the machine generates a loss, it would wipe out the entirety of your money.
There’s no recouping that money; it’s gone forever. You cannot use the machine again until you have worked and earned enough money to cover the cost of returning it. If you risk it all, you will eventually be left with nothing.
Losses as a Strategic Component
Losses are also a staple part of your trading strategy. No strategy is complete without it.
Your goal as a trader is to learn from the losses and understand what went wrong in order to develop a better plan and understanding of how a loss may come from this trade in the future, alongside how to avoid it better.
Emotions play a significant role in this process. If you blow your account on a single trade, the overwhelming emotional response will cloud your rationality and block you from being able to find the lessons in the losses.
When you can control losses and turn them from a complete head-on collision to a minor speed bump, you’re able to gauge a fair assessment of every lesson it’s teaching you and learn how to manoeuvre past them better the next time they seem to be coming.
The Innovation Markets Approach
Our members have mastered the art of embracing the rare but inevitable loss when it comes, whilst still remaining profitable throughout the journey.
When combined with our Crypto strategies, we end up celebrating when the market’s crash and everyone else is losing, we put ourselves in positions where it’s very difficult to lose.
When it comes to Forex, our strict risk management and position management education ensures a small -1% dent doesn’t damage our end of month results.
Position management involves determining the size of each trade based on the risk tolerance and account size.
We Do This With You, Live
We do this with you, day by day, live. You will only ever truly lose if you don’t follow.