More than returns it is the risk that matters. This is the common myth among traders and investors. Remember, your most important thing is not return, but your risk. As a trader or an investor you make more money by knowing and controlling your risk than by chasing returns. Once you learn to control and measure your risks your returns in the markets will automatically follow. Remember, risk wipes out your capital and at the end of the day every investors operates with finite capital. That finite number may be small or large, but then it is finite nevertheless.

There is another perspective to the superiority of risk over return. Let us say you took a wrong decision and lost 50% of your capital. Now on this smaller base you need to earn a 100% return to come back to parity. Which is why risk becomes so important? That is the reason you need to put a lot more focus on putting stop losses while trading. You need to focus on hedging your investments with appropriate puts or short futures. The bottom-line is that you must put more focus on managing risk. The returns will follow logically.