In addition to having a trading plan, it’s important to have effective risk management strategies in place. This includes setting stop-loss orders to limit potential losses and using position sizing to manage your risk exposure.
Stop-loss orders are orders that automatically sell a security if its price falls below a certain level. By using stop-loss orders, traders can limit potential losses and protect their trading capital.
Position sizing is another important aspect of risk management. This involves determining the appropriate size of each trade based on your risk tolerance and the size of your trading account. By sizing your positions appropriately, you can reduce your risk exposure and limit potential losses.