what is risk management? Learn risk management tools and techniques

Do you want to know how the risk management tools and techniques look like and when can you find it in your chart? Watch our latest video to learn where to find a not so easy to spot what is risk management.

Learn risk management tools and techniques – What does it say when it’s present?

We are going over taking care of yourself and trading and being humble, alright? Because humility and taking care of yourself is how you win. And it takes work to win and your ego is your enemy. Egos kill accounts, okay? Many traders, they get to trading because they feel it’ll give them free time, nearly free money, you can be your own boss, nothing can go wrong, you can play video games on the side just look at that screen over there, play whatever, and then you have all this. You can do whatever you want. You can go do some yard work, while you’re trading. You know, there’s this perception that you have this unlimited amount of freedom, okay? It doesn’t work like that. You feel like you don’t need to make rules or that you don’t need to understand anything. You know, a lot of people just come into trading thinking that, “Okay, it’s easy to access. It must be easy to get success too.” It takes a lot of, either ignorance or a lot of unrealistic goal setting or belief in self to approach trading like it’s going to be very easy.

Some of the lies that we tell ourselves are pretty entertaining. We get into trading and we end up losing money right away. And, of course, it is not our fault, it’s somebody else’s fault. It’s the broker, it’s the market makers, it’s “manipulation”, whatever it is, it’s never you, it’s always somebody else’s fault that you took money out of your bank account, then you put it into Coinbase or wherever it is, and then you transferred it to another exchange and then you traded it and then you lost it. That, somehow, was always somebody else’s fault. But it wasn’t yours. Your ego is going to kill you. And I know in the trading world, people who are very successful in another career, or in their life outside of trading, they assume that because they are successful in that, they can come to trading and be successful. I’ll just say, people like lawyers and doctors, when they come into trading or they contact their brokers and they’re like, “You know, hey, I can do this, I’m smart.” Sure, they are smart. We call those the Golden Hogs or the Golden Cows because they have a lot of money, but they have a lot more ego and they are not only unwilling to take the loss, they get angry and they put more money in. Brokers love people like that. Exchanges love people like that. Don’t be one of them, okay? Because Golden Hogs or Golden Cows, doesn’t matter, they’re all sheep. Don’t be a sheep!

The more that you know about trading, the more you learn about it, the more I’ve learned about it, the more I realized I don’t know anything. You need to find something that’s going to be a time-tested system and follow it like a robot, like the Ichimoku System, I will always preach to that as being probably the best first thing for anybody to learn to trade if they’ve never traded before, or if they’ve traded and they’ve not found success. The Ichimoku System is hands down, I believe the best way to learn how to trade. It is also a very profitable way to trade. I use it in my own trading, significantly. I could not recommend it enough. I have a quote up here, “No plan ever survives contact with the enemy. Know that every moment in the market, it’s its own universe of possibilities, but it operates in the same universe of probabilities.” That is my quote. Trying different systems, methodologies, and strategies over and over, this is something that a lot of people do, is they find a system or they… I think one of the first things that people do, is they find a Moving Average system, it looks simple, you can grasp it. You know, a moving average system’s easy to explain, easy to understand, so of course people use data from the past and they say, “If you would have bought here, when this crossed, and then you could have made this much money.” It doesn’t work like that. But, certainly there are some methods and strategies that are profitable like the Ichimoku system, but for whatever reason, you choose not to follow it, and then you think it’s the system’s fault or the strategy’s fault or it’s the method’s fault. You’ll try different things over and over and over and when you watch the video series on the psychology of trading, one of the things that we like to do is we like to avoid the issue, we don’t like to recognize that we are the problem with our trading, so we’ll do things like, read more books, get more education, do more and more and more stuff, try to find the best signal provider, try to find the best education. It doesn’t matter if you don’t have control over your reactions to fear and anxiety, which we do get into in future videos, but trying all these different things over and over, it’s just a way for you to avoid admitting that you are the reason for your failure.

And so, this brings us to what the most powerful tool in trading is, right? It’s that you are the final factor in determining how much money you get to lose, okay? The market will always move in the direction that is going to cause the most amount of pain to the most amount of people. You will never know how much money you could win or lose or what direction the market will go. You’ll never know for sure, okay? This is all probabilities. But, the most important thing that you do have control over, is the most important thing to have control of, and that is that you get to determine how much money you will lose. You are responsible for your losses. That is the most powerful tool in trading, alright? Again, you get to determine how much money you are going to lose.

Second most powerful tool in trading is accepting beforehand the money you’re going to lose, okay? One thing you need to know right away when you put in a trade is how much money you are willing to risk. Going into a trade and just willy-nilly, without any analysis, is gambling, but so is doing all sorts of analysis and a lot of study in a trade and taking it, but not having a determined loss target. Say, you need to know that your money is gone the moment you put the trade on, okay? And so, once you know that the money’s gone, it doesn’t have any control over you, because if you’ve determined that the money you’re risking on a trade is already gone, then you have no fear of its loss. Just deduct the risk from your balance, right away. Do it immediately after you enter your trade. If you have determined, again, I’m going to repeat this over and over, that most of the reasons that people lose money in trading is because they get afraid of their account balance, they get afraid of it going down, they get afraid of a trade running away from them. It should never run away from you. You should already know how much money you could lose and then, let it be there. Don’t adjust that stop, don’t move it lower, don’t move it higher, let it sit there, because if you keep fluctuating the set amount that you’re willing to lose, you’re going to go bonkers, you’re just going to go nuts, you’re going to go from trading into gambling. So, if you put $50 out on a trade to risk, take that $50 off of your account balance. Assume it’s gone. The worst thing that you can do is to convince yourself that the trade is going to be a winner, even before it’s played out. So, if you just know that the money’s gone already, that takes a lot of the fear out. That takes a lot of practice, that is not easy to do and I don’t mean to just say, “Oh, it’s as simple as changing your mind just like that.” It takes practice. It takes practice, but it takes practice with you actually following through with the trade, where you let it sit there, your stop gets hit, you deal with it, you move on to the next trade.

Journalling. This is something that, I personally, I thought journaling was stupid, I thought, “Okay, well, whatever I can remember the trades I take.” No, I can’t. I can’t remember all the trades I take or the ones that I did. I can’t remember all the winners and losers that I’ve had. I can’t remember all my big losers, I can’t remember all my big winners, but this is the thing that was most often skipped by new traders and that is journaling. It is essential to your success. You need to track each trade, note your feelings and thoughts during that trade and enter why you entered and exited trades. You can learn a whole lot about yourself if you do the journaling.

Now, I want to talk about getting into the healthy component of trading, because this is very true, too. This is also something that new traders will ignore and a lot of you here, if you have come here expecting to get a lot of information on, you know, just a signal to make money or a very easy, profitable system that can make you so much money you’ll have a Lambo in a month. This is the wrong site. This is the wrong education. If you do not follow these principles, you’re going to fail as a trader. Trading has so much more to do with your emotions, your psychology and how healthy you are, than it has to do with how much you know about the stock market, or the crypto market, or the futures market, or the Forex market. You need to eat correctly! Do not ignore this! You should have zero caffeine, while you’re trading, no high sugar foods in the morning, only complex carbs, fat, and protein. No high sugar foods, because that can mess up your trading more than anything. Skip the waffles. Steak and eggs and whole milk, that’s what you should have. And then, you should snack throughout the day, on healthy things. Whatever you’re doing trading, whatever you do outside of trading, as far as what you’re going eat, of course, you should eat healthy, but whatever you’re eating before you start your trading and during your trade day, needs to be healthy.

And then, exercise. If you fail to take care of your body, your body will fail you. There’s that old saying that, “The body fuels the mind” and one of the things that I really like to do is strength training, because it translates into trading more than any other form of exercise, because strength training means that you are in the process of lifting heavier and heavier weights, but it’s only done after considerable sessions of constant failure, because the goal in strength training is to fail often and fail a lot, because when you fail at a certain weight you can give lift to that weight later, by coming back to it. You need to offload a little bit of weight, maybe 10-12% and then, work your way back up to it, and then eventually, that failed weight that you had, you can blast by it. Sometimes it’s easy to do, sometimes it feels impossible, but 99% of the time, if you work hard enough at it, you can lift that heavier weight, because, in strength training, failure is the key to becoming stronger. It is the biggest teacher and the only way to success, and that translates very effectively to trading because in trading we have excessive amounts of failure. We will always fail, in trading and as traders, more than we will succeed. We will always fail more than we succeed. But, each failure should be a learning opportunity and if you just choose to ignore them by not journalling, by not taking care of yourself, you’ll just lose, you’ll just be a noob, you’ll just be one of those idiot retail traders that give brokers and expert traders, like me, all the money. I shouldn’t call myself an expert trader. I’m a profitable trader. I don’t know what an expert trader is. Anyways.

This is a big one too. If you want the biggest advantage over 99% of traders, go to therapy! Learn about yourself. I’m dead serious about that.

In summary, here, we need to accept that we cannot change a lifetime of unconscious defenses towards situations of pain and loss. We need to allow ourselves to experience our own thoughts, feelings, and moods, and emotions. We don’t try to change them, we just need to experience them and we need to reduce our trading commitment and avoid putting on a full position. We need to ease into these positions. You need to take a break, take a vacation. Trading is a career, it’s not your life. Find someone to talk about your trading day with, and talk about your successes and your failures. And you need to exercise and journal, journal, journal, journal. Trading is a very difficult, very lonely career and that solitude makes it even harder to cope with, especially with the strong emotions that we have. So, make sure that you take care of yourself before anything else. Thank you for watching this video and I look forward to talking with you in our future videos.