Risk management is a critical component of successful investing. Without proper risk management, investing becomes little more than a haphazard activity which is unlikely to produce consistently positive results. Proper risk management involves a commitment to disciplined trading. In this article I’m going to discuss two broad areas of risk management. The first area of discussion is position sizing, and the second, following through on your “Secondary exits” (a bit of explanation “Primary exit” means that the trade is going to its expected outcome. “Secondary exit” means that the trade is going in some other direction than the Primary exit).
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