Awareness # 3- NO-RISK Control
Examples of no risk control are: jumping out of an airplane at 10,000 feet without a parachute, going scuba diving without air in your tanks, or going bungee jumping with out a bungee cord. Trading with out any risk control will have the same disastrous out come. To have a positive out come a trader needs, at least, a stop loss, proper lot allocation, good money management, and a good exit strategy. Anything less is just plain trading suicide.
It is very tempting when trading a demo account to over trade the account. Let’s go for broke, or it’s only a demo or we haven’t got anything to lose attitude. This is where bad habits are formed and they do carry over to the live trading. A trader can get carried away and be in a situation like driving a car without brakes or up a creek without a paddle, not having any control but just going where the momentum takes them.
If a trader is serious about trading then risk control is a must. Risk control falls in the category as one of the basics to successful trading. If a trader is controlling risk they are taking charge of their trading and not waiting to see what happens.