Traders must manage risk to succeed in volatility

Risk management is essential for traders and investors in today's volatile markets. Aamar Deo Singh, a senior vice president at Angel One Ltd, emphasizes that managing risk can separate successful traders from those who fail. Traders often fall into common traps. One mistake is staying in losing trades too long. Many wait for prices to return to profit, which can lead to larger losses. Averaging down on losing trades is another risky approach, especially for short-term traders. Singh advises against it, as it can worsen losses in a downward trend. Over-leveraging positions is equally dangerous and can elevate risk dramatically. Singh highlights Market Price Protection as a valuable tool. This feature helps traders avoid losing money during sudden price changes. It converts market orders into limit orders to protect against sharp drops when the market is extremely volatile. Another useful strategy is the Trailing Stop Loss. This approach allows traders to secure profits by adjusting the stop loss to follow price increases, while holding steady during declines. It helps manage gains while minimizing risk. Traders should also consider using a Set Exit feature. This function allows them to set both stop loss and profit target simultaneously, reducing the need for constant monitoring and minimizing manual errors. For effective risk management, traders need to define their risk clearly. This means knowing how much they are willing to lose on each trade and having a plan to stop trading if they hit a monthly loss limit. Singh points out that a common myth is the belief that prices will always rise again, encapsulated by the phrase "Mera bhav aayega." While it's possible for stocks to recover, holding on to poorly performing trades can lead to more stress and potential losses. Traders should approach risk prudently, focusing on managing their capital wisely for long-term success.