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Risk management techniques protect capital from unforeseen market events from "summary" of Trading Systems and Methods, + Website by Perry J. Kaufman
Effective capital preservation is paramount in trading, where markets can be unpredictable and volatile. The implementation of structured strategies is critical to mitigate potential losses stemming from unexpected fluctuations. By employing techniques such as stop-loss orders, traders can automatically exit positions at predetermined levels, thereby limiting downside risk. This approach not only safeguards investments but also instills a discipline that is essential in managing emotions during turbulent market phases. Position sizing is another cornerstone of prudent management. By determining the appropriate amount of capital to risk on each trade, traders can ensure that no single loss will drastically impact their overall portfolio. This method enco...
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