Risk management

[Anakelv]

Risk management is the most important thing in trading, from my perspective, and your plan looks really nice. Still, you need to be careful with your losses and set stop losses very accurately because othewise there is a huge risk to lose really much due to the leverage.

 

[Gazel]

Quite useful article actually, thank you. I believe that risk management is a foundation of trading activity. I can note even successful trading activity, because if a trader wants to trade just for fun, then it's his/her right and nobody can prohibit him/her to do it. Risk management implies wise distribution of your deposit during a trading day. The wiser you will approach to risk management practices, the more chances to become successful you have actually. In my opinion, traders should open a deal with no more than 2-4% from their initial deposit in order to save it and consequently multiple it.

 

[jamesbarbar]

Risk Management Process
Step 1: Identify the Risk
Step 2: Analyze the Risk
Step 3: Evaluate or Rank the Risk
Step 4: Treat the Risk
Step 5: Monitor and Review the Risk

 

[VinceD]

Can I eliminate forex risks using risk management with currency forwards or futures?

 

[Keiffff]

Hi guys and girls, new here. Hello.
Okay, so I have pretty much the gist of things figured and have a couple of trading signals I’m using. But one of them has a risk management which I’ll copy below. And I cannot make heads nor tails of it and I’m not stupid. I get the basis of it, but actually getting a figure just gets me!
Using £3000 starting with 1:200 leverage FYI.
If anyone can elaborate or explain it in better terms that would be amazing! (Oh and I’ve asked the person running it who hasn’t replied)

“In order to make sure every pip worth the same value in terms of money on a weekly basis, this is what I do:

1. I calculate 5% of my current balance

2. I multiply the amount with my leverage

3. That amount is my weekly "trade size"

4. If needed, I can calculate my "trade size" to LOTS here: babypips.com/tools/forex-calculators/positionsize.php I add my "trade size" to the "account balance" box with 1% risk (the currency does not matter).

Example:

1. Balance: $1000 ---> 5% = $50

2. Leverage: 1:100 ---> $50*100 = $5000

3. Weekly trade size: $5000

4. $5000 in standard LOTS: 5

Every week I make the same calculation based on my NEW balance.

The meaning is I always trade bigger if I won and smaller if I lost, on a weekly basis. This method keeps my account live at all times!

The idea is every pip worth the same amount of money during the week, so the number of pips won or lost can be translated to money, instead of calculating 5% risk after every position.

So if I lost 50 pips and then won those 50 pips back, my balance will be just where it has started, and no loss was made.”

Thank you!

looking good

 

[TareqS]

Risk management is probably the most vital factor in trading. It is often ignored and many traders do not even care about it at all. Thanks for this nice post. It will certainly help many traders here.

 

[Purekiller]

Such an idea looks quite sensible and solid. It is very important to renew the dat about your balance in order to adjust your risk management to the current situation. Everything looks quite conservative and not really risky, but it still can bring you the profits. Risk management is very important in trading and I am a little confused that there are not so many posts devoted to risk and money management. These things under no condition should be underrated because they are the key features which can defend your whole trading budget from the occasional losses which may happen pretty frequently on the market. I'd also like to read more posts about risks management because it is of great interest to me.

 

[Goldcaster]

Very nice guide on risk management which is easy to follow and implement in your trading.
Risk management is of utmost importance in tradinf because that is the tool which keeps your account save from harm of occasional fluctuations which happen on the market all of the time. It is sad that not so many people know about these tools as they are concentrated to make more profits right away in a minute, however, it is vital to think about securing your capital on early stages. Like Warren Buffet once said 'the first and prime objective in any kind of investing is not to lose the money that you deposit' and this saying is right. It is hard to start making profits within the first week of your trading, but it is much easier to lose lots of money during this time. That is why a newbie should think of preserving the money he deposits first of all, and only after it can he be interested in making decent profits.

 

[Centrirdana]

Very informative post.
I just like the simplicity of the calculations made which enable traders calculate their risks in every particular deal. Actually, this can be made as an excel file where you can just type in the numbers and receive the answer. That would be really convenient.
The importance of risk and money management is usually underrated by the newbies which is one of the main reasons for losing the trading account. Such tools help traders preserve their deposit wahtever happens on the market and make their trading more consistent. It is very important to have predictable profits which will depend on a trader's knowledge but not some occasional fluctuations. I feel that every trader should aspire to that if he wants to become a professional trader and depend on their trading results solely. And the first step to that is risk and money management which will protect your money from going to nowhere.

 

[tomhiggs]

It is recommend that risking anywhere from 1% to 5% of the total value of your account on any given opportunity. But according to me, one should decide how much you want to risk based on what makes you comfortable. I count my libilities too and then structure my risk.