What more do I know than to talk about this topic from the angle or perspective of a trader? I'll do my best to relate to business as a whole but it will mostly be from the view of a trader. So, let's dive right in.
Everyone that has ever done business or is in business would agree with me that risks are a very important part of any business at all (trading inclusive). Anyone that doesn't have plans for risk/losses in business is definitely in the wrong field and should probably just go get a job where he can receive stipends at the end of each month.
As much as we'd want to be positive and optimistic, focusing on the rewards and neglecting the risks involved is one of the best ways to be out of business real quick. Yes, focusing on the rewards is good but the risk involved in each business or deal should always be kept in mind before jumping into whatever it is you want. That way you wouldn't be gambling or plying a quick route back to ground zero. Now, to the main reason I'm writing to you today.
Risk Management
This usually is like a fail-safe for me and it is what ensures I stay in business. Risk Management is the identification, assessment and prioritization of policies, conditions and whatever it is that poses a threat to a company's capital. To me as a trader, it would be the identification, assessment of structures that might cause my trade set-up to fail, adjusting my risks and rewards to fit within the confinement of what I've seen and finally deciding if it's a risk worth taking at all. If I had to tell a five(5)-year old, I'd probably say it's what one does to keep his company in good shape and avoid losing his company money.
Personally, when it comes to business I know there are five stages of risk management but I think I'll prefer to write about those next time while I talk about reasons for risk management. I've brushed a few but I'll talk more about them now.
Why Risk Management is Important
Well, I'll like to talk about just two so this doesn't get unnecessarily long.
1. Business Safety
It's very important to manage risk because that's what ensures you stay in business. I can't overemphasize this. People might be quick to laugh and pull the "I told you" line on you. Using innuendoes that suggest you should have stayed with your abusive boss or at a job you probably didn't like at all. So except you have some loyal friends that might be willing to help, you should be extremely careful. Although without risk money can't really be made, it is only wise to try to balance things. Focus on the positive but don't neglect the risks involved.
2. Integral Part of Trading
Risk management is an integral part of trading and any other business as well. Trading has taught me a lot of things about business. When I was new to this trading business, I'd take my trades risking thirty percent and waiting for a reward of about ten percent. Later, I realized I only had to lose 3 trades to be out of the business and I'd also need to win three times straight to recoup the losses from a single trade, lol. That's how bad I was till I found risk management.
Now, before taking a trade at all, I have to know how much I'll be risking which is usually not more than two percent by the way. With a risk of two percent now, I'm usually looking for at least four to six percent on each trade. Not only do I have to take fifty bad decisions in a row to be out of business but for every single right decision, I'll have to make two or three mistakes before I can totally erase the profit from a single win.
I really do hope that during the course of this write-up, I didn't give you the impression of you making no losses in business. There's absolutely nothing wrong in losing in business, it's only wrong when risks are not managed and you're at the risk of losing it all at once.
I hope you enjoyed your time with me.
Till I write again...
I am Pearlumie
Cryptocurrency and Forex Trader
Growth Marketer
Writer
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