Spot trading Risk Management
1.Position Sizing
Do not put too much capital on a single trade. The general acceptable risk is 1-2 percent of your total capital investing in each trade, which keeps your portfolio safe.
2.Stop-Loss Orders
A pre-set price of an asset that causes a trade to automatically close when the price decreases. This helps avoid losses and it eliminates emotion in your decision.
3.Diversification
Divide your investments in different assets rather than investing all your capital in a single asset. This assists in the reduction of the effects of a one poor performing asset on your entire portfolio.
4.Risk-to-Reward Ratio
Before trading in anything, calculate the probable gain against the probable loss. A common goal of many traders is to achieve a 2:1 or more ratio, that is to earn at least twice as much as they are risking.
