Are you still Gambling or start Trading?
Do you know that 3 in 4 traders have a profitable trading system. However 95% of all traders fail. The reason for that is quite simple, they use the wrong money management. Trading without a money management is just like gambling. The fact is, everyone could solve this problem without being a trading guru or math expert.
How to prevent yourself of failing?
First of all you need a proper money management to avoid a complete loss. This is the why you should never risk more then 1% – 2% of your trading capital with a single trade.
The different results of 1% and 10% risk per trade see in the figure below. Risk 10% per trade and loose ten times in a row, you have less then 40% of your starting capital left. If you only risk 1% you can loose ten trades and sill retain over 90% of your balance.
That is why a simple money management could prevent a complete loss and overcome a drawdown. Only change some small details.
How could you earn money?
No risk, no reward. Sure. But how about get a bigger reward than risk. The magic word is Risk-Reward Ratio, this means to earn more than you risk. Knowing your risk is crucial.
+ If your risk is $100 and the reward is $200, then the risk-reward ratio is 100:200 or 1:2.
+ If your risk is $200 and the reward is $600, then the risk-reward ratio is 200:600 or 1:3.
+ If your risk is $200 and the reward is $400, then the risk-reward ratio is 100:200 or 1:2.
With a 1:2 Risk-Reward Ratio you are breakeven with a winrate of only 34%. Would you just flip a coin (on average 50%/50%) for every trade whether to go long or short, you should be profitable. As you can see you do not have to either predict the markets nor need an outstanding winrate of 90%. By this simple money management technique it is possible to beat the market.
Keep in mind…..
+ trading without a money management is just like gambling
+ do not risk to much money in a single trader (small trading size)
+ diversify between different traders
+ avoid trader with high risk although their performance is well
+ use risk features like ZuluGuard to protect your trading capital
+ use a Demo Account to test traders
Learn more about Money Management in Social Trading:
Money Management with ZuluTrade
Where to start Social Trading for Free:
Check out one of our partners. New trader we recommend to start with a Free Demo account frist. Practise Social Trading without using your own money, get to know the platform and become familiar with all features. If you feel comfortable enough you could start with a Live Account and earn money.