3 Effective Ways to Protect Your Capital

Every successful trader knows that the best way to become a profitable trader is to focus on protecting your capital at all costs.

Once you are able to master that, the profits will come flooding in!

But how do you do that?

The first way to manage risk is to pick the right strategy.

Every trader has a strategy they tend to veer towards over time. Selling options, breakout trades, or smart money concepts are three popular ones.

These are the foundations of every trading move out there and by mastering them one at a time, you will be unstoppable.

Picking the right strategy also means having a goal and plan in place.

Entry point, stop losses, and price targets need to be known before getting into a trade. Why?

Because you will know just how much you can make or lose in a single trade and it takes the emotions and mystery out of it and keep your emotions at bay.

The next step is to risk only a certain percentage.

When it comes to managing risk with a small account, you need to stop looking at the dollar amount lost.

Losing $50 on a trade might not seem like much, but when you lose $50 on a $500 account, you’ve lost 10%. That’s a big move.

You want to be risking what’s best for you, but we suggest 1–3% on each trade. On a $500 account that would be anywhere from $5-$15 lost instead.

This doesn’t mean you can’t trade with more of your account, but you have to have strict rules when it comes to how much you are willing to lose.

Lastly, only trade with money you are willing to lose.

Never over-extend yourself by trading with more money than you can afford to lose. Why?

Because this will make your emotions too hard to control and it is almost a guarantee you will lose your entire account.

We recommend you start with no more than $100 and work your way up to having more discipline and a larger account.

When you can grow your skills and your psychology together, it will help you create a level of discipline needed that leads to success in trading.

Managing risk is NOT an easy thing to do when you start trading. In fact, it is probably the number one reason why so many traders fail.

You need to stop comparing yourself to others on social media and instead develop a game plan to manage as much risk as you possibly can.

That is how you will become a master at trading and watch your account explode with growth.