It's 3 AM. You're tossing and turning in bed. You have a smartphone in hand, staring at the screen looking at the stock market or cryptocurrency charts. The chart is dominated by red— the market is crashing. Your heartbeat is increasing, and there are furrows of worry on your forehead. It feels like everything is coming to an end!

Does this scenario seem familiar to you? If the answer is 'yes', then this article is for you.

When the market goes down, a professional trader or investor does not lose sleep. They remain calm. Why? Because they have a powerful weapon called "risk management".

If slight fluctuations in the market disturb your mental peace, then be sure—you are not trading, you are gambling. And you are not following proper risk management.

What is risk management really?

In simple terms, risk management is a plan that protects you from major financial disasters in any market situation. It teaches you how to protect your capital before making profits.

The first rule of trading is: "Survive first, then think about profit."

Here are some main reasons why you are losing sleep and how to fix it:

1. Are you taking excessive risks beyond your means? (Position Sizing)

The biggest reason for your sleeplessness is not having the right 'position sizing'. Suppose your total capital is 100,000 Taka. If you invest 50,000 Taka in a single trade and the market drops by 10%, you will incur a loss of 5,000 Taka. You may not have the mental strength to accept this loss.

Solution (The 1-2% Rule):
Professional traders never risk more than 1% or 2% of their total capital in a single trade. That is, if you have 100,000 Taka, plan your trades so that the maximum loss is 1,000 to 2,000 Taka. When you know that your maximum loss is within your control, you will never lose sleep.

2. Do you have no 'stop loss'?

Stop loss is like a car's seatbelt or airbag. You never want an accident to happen, but if it does, this is what saves your life.

Many people think, "The market will bounce back"—and hold onto losing trades in hope. This is the biggest mistake. No one knows how low the market will go if it crashes. Not using stop loss means driving a car without brakes.

Solution:
Before entering a trade, decide the price at which you will accept a loss if the market goes against you. And definitely set a 'stop loss' order at that point. This will control your emotions and save you from major disasters.

3. Are you putting all your eggs in one basket? (Diversification)

If all your money is invested in just one stock or one coin, if that specific asset crashes, your entire portfolio will collapse. It is natural to feel panic.

Solution:
Invest your capital by diversifying into various sectors (such as: some in stocks, some in bonds, some in gold or other assets). Even if one sector performs poorly, others will back you up. This is called diversification.

4. Are you trading with the fear of losing?

A harsh truth is—if you trade with money that you cannot afford to lose (such as: your child's school fees, medical expenses, or borrowed money), you will never be able to trade calmly. This fear will force you to make wrong decisions.

Solution:
Only invest in the market with money that, if lost entirely, will not have a significant impact on your daily life. This is called "Risk Capital".

Conclusion: A peaceful sleep is a sign of success

Remember, the market will not always move in your favor. Both profit and loss are parts of this business.

The goal of a successful trader is not to make a profit on every trade, but to keep losses small and let profits grow.

Review your trading style today. If you find that the red color of the market is stealing your sleep at night, then understand that there is a major flaw in your risk management. Start using proper position sizing and stop loss. You will see, even if the market crashes, you can sleep peacefully because you know your safety net is with you.

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