- diversification
- keep each position size small
- cut losses quick (for trading positions)
When people who care about me know I invest/trade in financial markets, the natural question they will ask next is whether I can make good money from the markets. I tell them I am not sure if I can make good money but I am at least confident I won't lose big money. I feel more confident in my risk management than money-making ability because risk management is a more controllable process.
The 20Apr2020 negative oil price fiasco has shaken my confidence in my risk management even though I was not personally affected by it. I do not touch oil futures or whatever stuff which I am not confident of having an edge. I am lucky to have lost enough in the past to learn that lesson.
I have 3 basic rules for risk management;