Risk Control Rules

Risk control rules. Before a trade can be initiated, it must conform to your risk control paramaters. Each trader has his or her own tolerance for risk. If the risk is too high for that trader, then the trader will make bad decision due to stress. Also, the amount of capital that is risked in each trade will make a difference to the overall profitability/survivability of any trading strategy. Traders must tolerate some losses, but keep those losses manageable and smaller than the overall gains. Think about the following issues to define your risk control rules;(a) How much capital loss can be tolerated over a period?(b) How many losing trades are realistic over that period?(c) Is the risk per trade small enough to allow for a reasonable number of losing trades?(d) How much risk should you tolerate on this trade?(e) What if you exit at a loss, then the market reverses back in your favor? Do you re-enter?(f) What if the market goes sideways (consolidates)? You are still at risk.(g) When a trade is in a winning position, how much of your gains should you continue to place at risk in the market? Should you bank some of the profits? To protect against risk, we can adjust our position size, and our stop-loss orders. Even stop-loss orders don't guarantee you any protection. Do not enter any positions that will endanger your overall strategy. Every trade must conform to your risk rules.