6 Ways to Increase Profit Without Increasing Risk
Which trader does not want to increase profit in forex trading? The answer is almost certain: nothing. Every trader certainly at least aspires to be able to increase profits in trading. But you also need to realize that in trading profit opportunities are definitely directly proportional to the level of risk. Thus, when you intend to increase your profits, never forget that behind that there is a risk of loss that is not less important.
Then how to increase profits without fear of risk?
This paper is not intended to eliminate the possibility of loss in trading.No. This article is intended to share knowledge and experience in order to continue to enjoy trading even though it always goes hand in hand with the risk of loss that is ready to “nudge” us at any time.
The real solution lies in your expertise in managing your capital. There have been many writings that discuss money management, risk management, trading plans and trading psychology . All writings depart from the “soul” of trading, namely 3M: Mind, Method, Money.
Here are some tips that you can try, based on our experience in dealing with the world of trading for at least the last ten years.
1. Map Capital Strength
See how much your capital strength is, then map it out by making a trading plan.
Profit targets should be realistic. For example, the average trader usually earns 10-20% per month from the initial capital.
We are talking to average traders, not super traders in the same class as Ed Seykota. In the world of forex trading, it is possible to get profits up to 100% of capital per month (I have even been up to 80%), but such events can be said to be rare or inconsistent. Maybe there are those who can consistently make hundreds of percent profit per month and last for years. But if there is, obviously he is not a trader.
Let’s talk about the reality that we often meet, where even for consistent profit, even people still have difficulties. This is what we want to try to help.
Now, if you want to get – for example – $ 1,000 or $ 2,000 per month, it is only natural that you prepare capital of around $ 10,000. It’s a bit unrealistic if you target $ 1,000 – $ 2,000 per month if your capital is only $ 500.
Please understand, I’m not underestimating a trader with small capital. The point is target profits according to your capital strength. Based on experience, with a capital of $ 500 (for example), it’s realistic enough if you target earning $ 50 to $ 100 per month.
2. Expand Views
Most traders just stick to one trading instrument. If he’s trading forex, it’s usually only fixed to one currency pair. If he is a stock index trader, maybe just see the Nikkei. Or there is also only gold trading.
It’s not wrong if you do something like that, but that also means you will just ignore opportunities in other currencies or other stock indices. In fact, there are so many trading subjects that you can trade. 17 (seventeen) currency pairs, 3 (three) commodities, 8 (eight) stock indices and 183 (one hundred eighty-three) selected shares that can be transacted on CFD.
Do not have to monitor all the products mentioned above, but at least try to expand your view because opportunities can appear in other products.
3. Manage Risks
As stated, the risk is directly proportional to opportunities. For this reason, you need to set how much you tolerate the risks that might occur.
Risk in forex trading is certainly a loss. If you do not limit risk tolerance, it is the same as letting all your capital (possibly) be consumed by the market.
This risk limitation is also regulated in the trading plan. One technique is position sizing. With position sizing, you can transact comfortably without worrying about experiencing too much loss.
At the same time, you can also maximize existing profit opportunities. You don’t need to be afraid to open a position of two, three, or even ten lots at a time as long as the calculation of the risk is still below your tolerance limit.
Most traders don’t realize that profits should not be mixed with capital. If for example you start trading with a capital of $ 5,000 and you have managed to collect profits of $ 1,000, then immediately withdraw the profit. Leave the balance on your account back to $ 5,000.
Why is that?
This is so that you do not “fall asleep” by assuming that your capital is still “safe” even though you are experiencing losses. Like the example above, you have managed to make a profit of $ 1,000 so that your balance becomes $ 6,000. In the next transaction, it turns out that you experience a floating loss of up to $ 1,000. In a situation like this, a trader often thinks, “Ah, my equity is still $ 5,000 … the only ‘lost’ profit was yesterday.”
This feeling of calm washed away. Often traders who are in such conditions actually expect prices to bounce back, so that they can benefit. Often it is precisely when he really loses, regret arises because he thinks his hard work of collecting profit before becomes futile. Even quite often a trader who mentally dropped at that time and wondered, “Is this forex trading really suitable for me?”
It’s different if you really intend to increase capital. If for example, from $ 5,000 your capital grows to $ 6,000, then immediately adjust your trading plan with the nominal capital available. If for example, the risk tolerance per transaction is $ 500 per trade (10 percent of capital), then it can be increased to $ 600 per trade.
The exit strategy is also important. The simplest is to close the position after the target profit is reached, or stop-loss is affected. It can also close a position as soon as your trading system requires it.
What is less widely realized is to immediately close the position after the loss reaches a certain percentage of the profits that have been obtained previously.
A concrete example like this: before you have managed to raise a profit of $ 1,000. You should then specify that if the next transaction causes the profit to be reduced by 50%, then you will close the position. Thus, your mental and capital will be maintained.
Of course, this does not need to be applied in the letter Lijk. Apply the rule to certain multiples, for example, every multiple of $ 1,000, depending on the amount of capital and the profits you earn.
6. Move On
This last point is closely related to trading psychology.
We are equally aware that there is no trading system that can be 100% accurate. There are times when you experience a loss because the market does not move according to your estimates.
At such times, all you have to do is evaluate, and immediately move on. There is no point in regretting the money lost in the merciless market movements. If you really have a good trading plan and manage risk tolerance, there is nothing you need to worry about. The show must go on.
Such are some points that can help you maximize trading without the need to be paranoid, haunted by the fear of loss. Hopefully useful.
Greetings no fear.