Risk Management for Beginner Investors and Traders

Investors who survive in the market for a long time are not the ones who guess right every time, but the ones who keep each individual loss small enough to avoid serious damage and have the discipline to follow their plan.

1. Position Sizing

Before buying, you should be able to answer: "If I'm wrong, how much am I willing to lose?"

• Many traders follow the rule of risking no more than 1–2% of the portfolio per trade
• Example: With a 100,000 baht portfolio, risking 1% = being willing to lose 1,000 baht. If the stop-loss level is 5% away from the entry point, the appropriate position size is 1,000 ÷ 5% = 20,000 baht
• With this approach, even if you are wrong 10 times in a row, the portfolio still has almost 90% left

2. Stop Loss

• Define the point at which "our view is wrong" before entering the trade
• Set it based on price or fundamental reasoning, not a number you feel comfortable with
• During major news, price may gap past your Stop Loss, causing a larger loss than you set (Slippage). Read the economic calendar

3. Understanding Leverage

Leverage means using borrowed money or collateral to open a position larger than the money you have.

Leverage amplifies both profits and losses. Many beginners lose everything because of Leverage, not because their analysis was wrong.

4. Diversifying Risk

• Do not put all your money into a single stock, a single coin, or a single asset type
• Beware of false diversification, such as holding 5 tech stocks that rise and fall together
• Always separate long-term investment money from short-term trading money, and have an emergency fund first

5. Risk/Reward Ratio

If your profit target is 2 times your risk (1:2), even if you are right only 40% of the time you trade, you still have a chance of making an overall profit (before fees). A trading approach that needs to be right 90% of the time to be worthwhile is a very fragile system.

6. Emotion Is the Biggest Enemy

• FOMO: fear of missing out, chasing price after it has already risen sharply
• Revenge trading: increasing size after a loss to win it back quickly
• Refusing to cut losses: hoping the price will come back

The way to deal with this is to keep a trading journal for every trade: why you entered, why you exited, and how you felt, then review it every month. The website's My Portfolio system helps you record trades and link news to the positions you hold.