Risk management

[bigdolly]

Your risk management plan looks very attractive. But in any case, you try to improve it based on your experience. Proper risk management will allow you to minimize the chances of the destruction of your trading account and will insure you against unnecessary losses.

 

[downtrend]

To all traders 5% risk is quite high, I will not support that much risk in trading. Risk management is not easy for traders, until he is not well practices he can not manage it. It is a long process to learn all about taking risk and risk management. They will learn it by doing mistakes and apply different techniques. It need practice to prove efficacy of their strategy.

 

[Keithstyles1]

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!

Looks good

 

[Ken_T]

Certainly on the right track IMO

 

[pashaev]

Risk management is not so much about experience as it is about character and discipline. Like driving a car.

 

[davtrent55]

5% is too high imo

 

[ForexWarrior2020]

To all traders 5% risk is quite high, I will not support that much risk in trading. Risk management is not easy for traders, until he is not well practices he can not manage it. It is a long process to learn all about taking risk and risk management. They will learn it by doing mistakes and apply different techniques. It need practice to prove efficacy of their strategy.

I agree. 1-2% is plenty especially if you're going for 2/3R and then you're gains become more attractive without your risk getting out of control

 

[bigdolly]

To all traders 5% risk is quite high, I will not support that much risk in trading. Risk management is not easy for traders, until he is not well practices he can not manage it. It is a long process to learn all about taking risk and risk management. They will learn it by doing mistakes and apply different techniques. It need practice to prove efficacy of their strategy.

If 5% is the risk per trading day, then it is perfectly acceptable since splitting it into 5-10% trades you get 0.5 - 1% per trade which is a kind of a rule of thumb in trading community.

 

[FmrBrokerExecutive]

5% is indeed high but not even that insane compared to what I use to see on the trading desk all the time. Many retail traders simply cannot risk taking10%+ risk per trade at times. It's very sad that people don't understand how easy it is to lose 5+ trades in a row and boom - half (or more) of your account is gone!

 

[fxoday]

If follow a suggestion from experienced or professional trader 2% risk in every plan trading, because if use higher risk, usually how to recover the loss will harder, because loss will decreasing account balance.