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So, grab your cup of coffee and get comfortable because, as you can see from the title, this is important.
A trader who doesn't manage their risks
A trader without good risk management simply won't be successful.
They may get lucky, but they'll never be able to achieve long-term profitability, nor will they be able to accurately evaluate their results. And they'll most likely never be able to afford that vacation to Dubai.
Your strategy is incomplete if you don't have your risk management in place. Not only are you at greater risk of losing money, but you're also wasting your most valuable asset: time.
What is risk management?
Risk management is the theoretical and practical exercise of limiting the possibility of losses in your trades. How do we do this? Through techniques like leverage and stop losses.
4 techniques to boost your risk management
Let's look at some strategies you can use to protect your capital:
Leverage: A method that allows you to trade with more money than you have in your account. It's a loan that your broker provides to complete an investment. Learn more here.
Hedging strategies: These are a way to reduce the risk of a trade by offsetting potential losses with probable gains in another transaction.
For example, you could buy a futures contract for oil and sell a futures contract for gold. If the price of oil goes up, you'll make money on the oil futures contract. The same goes for the other contract: if the price of gold goes up, you'll make money on the gold futures contract. So, if one goes down and the other goes up, you can reach a break-even point with a median balance.
Using options: Options are a type of contract that gives you the right, but not the obligation, to buy or sell an asset at a predetermined price on a predetermined date.
For example, you could purchase a call option to protect yourself against a drop in the price of Ethereum. If the price of Ethereum goes down, you can exercise the call option and buy ETH at the agreed-upon price, thus avoiding a loss. However, if the price of Ethereum goes up, you have the option to pay the option premium and not exercise the right to buy the underlying asset, which in this case is Ethereum.
Stop losses: A tool that will do wonders for your investments. It's a type of stop-loss order that is placed automatically when you open a trade. This helps you immensely to keep control by closing a specific entry if the price of the asset reaches a predetermined level.
AI-based indicators that take your strategy to the professional level
Our team has many years of experience in the market. And once the AI boom arrived, we decided two things:
It was definitely a million-dollar opportunity.
We weren't going to be left behind.
And both our own risk management and that of our clients literally tripled in effectiveness.
Our Hammer and Pump indicator, the Buy or Sell Estimation Indicator, and the Bull or Bear Attack Direction Indicator are very powerful tools that significantly contribute to our effective risk management every day. This is because they provide us with real-time data, efficient interpretations and analysis, as well as personalized alerts that are explained intuitively and up-to-date.
The future is now, and we're at the forefront to ensure that you have access to the widest range of tools to continue building your path to financial independence.
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See you soon, trader!
For this article, prompts have been used to request information
interpreted and provided by AI (Google Bard). Written and edited
by Kevin David Terán and verified by Pedro Arizaleta and Erwin Sánchez