Usually, when day traders hear of the word risk all they think about are lot sizes, leverage, stop losses and take profit. Obviously, there is nothing wrong about that these things are also important as far as risk is concerned. However, these are not the primary factors to determine how risky a trade or an investment is.
The primary indicator of risk is price. Price should be considered first. You can set the right lot size and place the correct stop loss or take profit but if you bought at the wrong price; nothing is gonna save you, in other words you are doomed.
A trader’s main focus should be in buying or selling at the most adequate price. A long trade executed at a higher price is more risky, a short trade executed at a low price is, again, very risky. Traders should always consider the old, famous motto; buy low and sell high.
Risk management should not be excluded from market analysis. As you analyze the market always keep risk in mind. You are, at all times, suppose to buy at the lowest possible price and to sell at a cheapest possible price. This is the best way to increasing your win rate. Success in trading is determined by these two things; a good win rate and proper risk management.
