n the dynamic world of online trading, understanding risk management is key to safeguarding your investments. In this article, we’ll delve into a practical example from a YouTube tutorial on Deriv, where the trader demonstrates how to set up stop loss and take profit to manage risks effectively.
Step 1: Assessing Risk Tolerance
The trader begins by evaluating their risk tolerance. In this case, they decide to risk one dollar on a trade. This self-imposed limit ensures that potential losses are controlled and within acceptable limits.
Step 2: Setting Stop Loss
To mitigate potential losses, the trader clicks on the line representing the trade and navigates to the “SL” (Stop Loss) option. They input the amount they are willing to lose, which, in this scenario, is the pre-determined one-dollar risk. After inputting the amount, they click the arrow to save the setting.
Step 3: Confirming the Stop Loss
The trader proceeds to click on “Modify” after receiving the notification that the stop loss has been set. This step confirms the stop loss order, ensuring that the predefined risk limit is in place.
Step 4: Calculating Potential Gain
While the trader is willing to risk one dollar, they also aim to secure a profit. In this example, they express the desire to earn twice the amount they are risking. Therefore, the target for the take profit is set at $2.
Step 5: Setting Take Profit
Similar to the stop loss, the trader navigates to the line representing the trade, clicks on the “TP” (Take Profit) option, and inputs the desired profit amount, which is $2 in this case. The setting is then saved by clicking the arrow.
Step 6: Confirming Take Profit
After setting the take profit, the trader clicks on “Modify” to confirm the order. This step ensures that the system acknowledges the take profit target, providing a clear exit strategy for the trade.
Conclusion:
Effectively managing risk in trading is a skill that can significantly impact your overall success. By setting up stop loss and take profit levels, as demonstrated in this tutorial, traders can control potential losses while aiming for desired profits. Remember, each trade is a calculated decision, and implementing risk management strategies is a crucial aspect of navigating the unpredictable nature of financial markets. Watch the market closely and observe how your risk management techniques influence your trading outcomes