One of the biggest errors that new traders make is trading too big. If you trade too large of a position size you will inevitably give back any profits you earn with your first losing trade or string of losses. 

There is a common saying on Wall Street “Let winners run and cut losers short.” This quote tries to express the principle of creating big wins or small losses

A stop loss is set after a trade entry at the price level on a chart where a trader will accept being wrong and exit for a small loss. A stop loss should be placed at the level price should not go if the trade is correct.

Here are my top picks for the best books on risk management for traders. These books cover the importance of position sizing, stop losses, trailing stops, total risk exposure, leverage, risk of ruin, and surviving losing streaks. Risk management is a crucial aspect to profitable trading along with a trading system with an edge and the right psychology. A trader needs all three for profitability and risk management to simply not lose all their capital eventually.

A trailing stop loss is a risk management tool for locking in profits on a winning trade. A trailing stop is a strategy that moves the exit point for a trade as price moves in the right direction to increase profits. A trailing stop loss is a quantified strategy to keep a trader in a trend until the end when it starts to bend.