What is risk management in trading?
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"Risk management in trading involves taking proactive steps before entering a trade"
Risk management is like a seat belt, it doesn’t guarantee you won’t have an accident but it generally increases your chances of survival.
Just as wearing a seat belt doesn’t guarantee absolute safety in a car accident, risk management does not eliminate all risks. Rather, it is all about reducing the likelihood and severity of the negative outcomes or losing trades not eliminating them.
Trading in the stock market involves inherent uncertainties that we are unable to control. Market conditions can be unpredictable and unexpected events can lead to significant price fluctuations. Risk management in trading involves taking proactive steps before entering a trade. Effective risk management strategies greatly increase your chances of surviving and thriving in the field of trading. By setting stop-loss orders, diversifying your trade portfolio, and employing position-sizing techniques, you can limit potential losses and protect your trading capital.
Credit: Quora