Keeping your account safe is the number one rule when it comes to trading, there are plenty of different ways that you are able to do this. Many of which you may have come across and may seem quite obvious, some others may be a little more secret.
So let’s take a look at what sorts of things you can do to help keep your account safe.
Reducing lot sizes: One of the main ways that you can dramatically reduce the risk to your account is to reduce the trade sizes that you are trading. If you are trading at 0.05 lots then reducing down to 0.03 lots or 0.02 lots will dramatically reduce the amount of risk that there is on your account. Not only does each trade now offer less risk should the markets move against you, but when a trade hits your stop loss it will be taking out a smaller chunk of your account. It could also enable you to place additional trades without increasing your overall positions and margin being used.
Making fewer trades: Sometimes we like to put on a lot of trades, especially if the current market conditions make it easy to put some trades on, the problem is that with each additional trade that you put in, you are risking more of your account and putting more of your equity into the active markets. In order to reduce the risk, you should try to place slightly fewer trades at a time, the fewer trades the less risk that there is.
Alter your strategy: If your strategy is causing you to open a lot of trades, then either it is a high-frequency strategy that can be quite risky to an account or your entry requirements are quite loose. One way to get around this is to add in some additional or tighten up the current entry requirements. This will make each trade a lot more specific and the strategy will end up owning fewer trades at a time.
Don’t copy others: It can be easy to get dragged into the idea of copying someone else as they trade, they are doing all the hard work of trading right? So why would I bother doing all of this work when I can just use theirs? It sounds great on paper, but unfortunately in the real world, it doesn’t always work out so great. When you copy their trade, do you know why they made that trade? Probably not, in fact, you have no way of knowing if even they know why they made that trade. If things go wrong, you do not know how to correct them and so you are pretty much risking your money on something that someone else has said, not really something you should be doing.
Take breaks: This won’t directly affect the risk on your account for the individual trades that you put on, but it will help reduce the risk of you making a mistake or placing too many trades. When we become tired or stressed, our decision-making skills all seem to fly out the window. So taking regular breaks in order to relax and clear your mind is important, not only is it healthy for you but having a calmer mind means that when you come back to make some decisions on what you need to trade, it will be easier to follow your trading plan and you won’t start to take shortcuts due to frustrations that were building. SO take regular breaks, they help you in more ways than one.
So those are a few of the ways that you are able to help reduce the risk to your account, of course, there are other things that you can do. Just remember that risk management is one of the most important parts of a trading plan so being able to reduce the risk is paramount to an account remaining successful.
