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7 Effortless Trading Risk Management Strategies

Risk management is a key component to successful trading. Without it, traders are dangerously vulnerable and could make just one or two bad trades before losing all their hard-earned money.

Remarkably trading risk management is an essential but often overlooked prerequisite to successful trading.

That’s because risk management helps negate losses by protecting traders from losing their money. If a trader can successfully manage risk however, they open themselves up to the potential of making significant money in the market. 

Below we’ve listed seven easy risk management strategies that traders new and old can use to keep themselves trading as securely and safely as possible.

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A Trader’s Guide to Trading Leverage

A commonly asked question by both new traders and those inexperienced with trading leverage is: What does leverage mean in trading?

At its heart, leverage means a powerful investment opportunity. Hailed as one of the most indispensable tools for traders, leverage can be used to take advantage of the smallest price movements, make your portfolio geared toward greater exposure, or even stretch out your capital. 

However, just like any trading strategy, trading leverage also comes with precautions. Because trading leverage involves the use of borrowed capital, traders must ensure that they’re not borrowing – or risking – too much.

In this trader’s guide to leverage we’ll tell you all you need to know about what leverage is, how it works, and when (and where) it should be used.

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News Recap: Bitcoin broke above $50k for the first time since May as enthusiasts continue to flock to the Cryptoasset following its most recent bull run

Last week saw financiers and investors flee to safety on rising delta variant concerns and mounting pessimism about the rate of economic growth. The Dollar, Yen and Swiss Franc were the weeks top performers in FX on the haven bid whilst commodity currencies slumped lower across the board. AUD/USD closed at its worst levels since November of last year whilst NZD/USD broke down following the imposition of a nation-wide lockdown following the discovery of its first confirmed Covid case since February. The action taken by PM Ardern resulted in the RBNZ pulling back from the expectation of a 25bps hike and instead maintained the OCR at 0.25%.

The week ahead will see PMIs released across Europe and the States whilst participants will now turn their attention to Core PCE data and the Jackson Hole Symposium.

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News Recap: WTI Crude is currently down by over 3% as the Delta variant continues to pose a threat on the demand side

Last week, market participants digested the aftermath of the weeks key risk events which included the latest US jobs report. Financiers watched the greenback surge higher following the strong report which saw over 900K jobs being added to the US economy. The figure was matched by an unemployment rate of 5.4% which beat expectations. The week ahead will see several FOMC members speaking who will be reminded of the need to begin considering tapering following on from the recent data releases.

UK Focus

In the UK, the BOE left rates unchanged as expected and maintained their stance on inflation being transitory as markets observed another MPC meeting. The asset purchase facility which is currently at £895bln was left unchanged and had little pushback following the exit of MPC member Haldane who had called for a £50bln reduction in the previous meeting. Sterling remained stronger over the remainder of the week with EUR/GBP slumping to its worst levels since April.

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News Recap: Fed Chair Powell continued to frame inflation as transitory and expects it to continue to remain elevated in the coming months before moderating.

Last week, market participants digested the aftermath of the weeks key risk events which included the latest FOMC Meeting. The FOMC left rates unchanged as expected and few changes were made to the statement. Fed Chair Powell continued to frame inflation as transitory and expects it to continue to remain elevated in the coming months before moderating. The Fed Chair also reinforced the fact that the labour market is still yet to recover, and substantial progress is yet to be made. The greenback was able to recover marginally as financiers rebalanced for month ending. The DXY initially slumped over 1.2% over the course of the week before closing the month above the 92.00 handle.

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News Recap: Bitcoin has traded to its best levels since mid-June as enthusiasts continue to await the next potential breakout above $41,000

Last week, risk assets attempted to recover as demand for the Yen cooled heading into the nations extended break. Oil markets which had initially slumped by almost 10% following the impromptu OPEC+ meeting and agreement recovered to close the week above the $72.00/bbl mark. Gold continued to trade indecisively as participants found a floor around $1,790 whilst the greenback edged to its best levels since April despite pulling back towards the end of the week.

World News

Asian markets began the week mixed as the momentum from last week’s session on Wall Street cooled as participants look ahead to key risk events which is set to include the latest FOMC meeting, mega-cap tech earnings as well as month end. The Nikkei 225 was the top performer as markets pressed higher by over 1% with a brief break above 28,000.

On the Covid-19 front, Australian PM Morrison outlined that the recent protests against the stay-at-home order risks increasing cases and infections further. Separate reports outlined that the New South Wales government were mulling over whether to maintain restrictions through to mid-September. This comes as the nation has reached an agreement for an additional 60mln doses next year with 25mln set for 2023.

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News Recap: UK CPI printed at 2.5% YoY and Average Earnings Growth hit a stunning +7.3%

Stocks in the US fell Friday to push the major indexes to close the week in the red, as rising concerns over inflation outweighed strong retail sales data and better than expected quarterly earnings reports from the US big banks.

The bond market continues to buck inflation fears, as the 10-year US Treasury yield fell to around 1.30%. Investors are also watching the surprise decline in the yield of the 10-year Treasury note. This indicates there is a concern for stock investors in that the falling yield could be signalling a slowing economy. One worry has focused on the potential for a more prolonged period of high inflation that could force the Fed to tighten policy and raise interest rates sooner than expected.

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News Recap: Sterling staged a recovery last Friday as markets enjoyed a more positive trading session.

World News

Markets in Asia started the week positively as participants continued to reflect on the broad positive risk tone observed last Friday. The Nikkei 225 was the biggest gainer; closing higher by over 2% with the index encouraged by outflows from the Yen and better than expected data. The ASX 200 traded higher by almost 1% though upside was limited by losses in consumer related stocks and with Sydney bracing for an extended period of stricter restrictions after an increase in Covid-19 infections.

Last week Friday saw G20 ministers agree on a minimum corporate tax of at least 15% where new rules for multinationals have also been established. The new measures were met with support and applause with US Treasury Secretary Janet Yellen outlining that the tax deal will raise revenue for governments and help facilitate necessary investments.

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PM Johnson will announce plans to abandon majority of the Covid-19 rules from the 19th of July.

Asian equity markets kicked off the first full week of the new month and quarter with a mixed session as market participants await some of the weeks key risk events. The ASX 200 was kept afloat by strength in commodity related sectors whilst the Shanghai Composite was marginally higher despite the lowest Chinese Caixin PMI print since April of last year.

World News

On the Covid-19 front, PM Johnson will announce plans to abandon majority of the Covid-19 rules from the 19th of July. This will make the wearing of masks voluntary in public places whilst the scanning of QR codes to enter certain establishments will no longer be required. On the other hand, officials in South Korea have warned that the virus is spreading at a rapid rate given the surge of the delta variant. The nation is currently in talks with vaccine producers including Pfizer and Moderna as they seek to mitigate and manage the disease.

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News Recap: Former UK Chancellor Sajid Javid has taken the reins from Matt Hancock as the new Health Secretary following his resignation over the weekend.

Going into the week ahead, financiers and investors will be looking towards month and quarter end rebalancing as well as a slew of key risk events including the US labour market report. The forecast suggests that at least 600K jobs have been added in the past month, higher than the month prior and further supporting the need for the FED to consider the need for tapering asset purchases. Heading into the report, the US still sits around 7mln jobs below pre – pandemic levels.

Europe News

In Europe, Germany’s Covid-19 cases continues to subside as recoveries outpaced new infections. It was also reported that the nation imposed a 14-day quarantine on individuals arriving from Portugal. In addition to this, German Chancellor Merkel intends to ban those travelling from the UK given the rise in delta variant cases. In the UK, former UK Chancellor Sajid Javid has taken the reins from Matt Hancock as the new Health Secretary following his resignation over the weekend. Javid has outlined that his top priority remains bringing things back to normal as soon as possible.

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