Don’t over-monitor the market and your stop loss
The first risk management strategy for stock traders in the Netherlands is to limit losses, and it’s probably surprising that I didn’t start far more apparent advice such as: always set a stop loss when trading.
This mistake comes from every blog post or YouTube video about trading or investments, starting with advice on how important it is to have a stop loss in place.
I know it’s essential, but you’ll probably agree with me: setting a stop loss works only part of the time and can be highly emotionally draining because we constantly (and mostly subconsciously) monitor our trades and the market.
When we see signs of an adverse move, we tighten our stops, and sometimes we even exit positions too early because we want the pain to stop.
This is why I believe in a different approach: limiting losses and cutting losers short is an absolute necessity, but it has to be done in such a way that you minimize the emotional effects this process has on you. This can be achieved by having multiple rules for your exit strategy at any given time and not just one single rule that, if violated, will result in your immediate loss of capital.
When using stops, my favorite trading strategy is the Fibonacci retracement level + daily pivot point. It allows me to enter trades with very little market exposure yet provides an effective risk management tool while I’m waiting for the trade to play out (and also gives me some nice pips along the way).
The second risk management strategy for stock traders in the Netherlands is to stop losses on every trade. It may seem straightforward, but it’s incredible how many of us are trading …Top 5 Risk Management Strategies for Stock Traders in the Netherlands Read More