Posts Tagged ‘risk management’

Understanding risk-to-reward ratio in technical analysis is the key to success in forex trading. So, what is risk-to-reward-ratio? It is a ratio of how much you are willing to risk in any single trade with respect to how much you expect to earn in that trade. For example, assume that your stop-loss is 10 pips. Also, assume that your take-profit is 40 pips. So, you are willing […]

You might have heard about the 1% risk management rule. It may be a great method to start, but it is not very straightforward. You could be risking too much, if you are very ambitious about your initial deposit. Hence, trading forex is 80% psychology and 20% technical ability. After sustaining a string of losses, you need to maintain your mindset as a trader […]

Managing risk in trading has many different aspects. A good trading plan helps you to identify how much risk to accept in total and how much to take on any given trade. Overall profitability is not only determined by choosing winning trades. Your winning trades should run longer than your losing trades on average. Your take-profit should be greater than your losses. You should aim […]

There is a saying, the chance favors the prepared mind. Hence, you must balance opportunity with risk management. A way to measure risk to decide the trade size. You can maximize your chances of winning by combining both fundamental and technical analysis. In ranging situations, you should aim for a risk to reward ratio of 1:2. In trending situations, you should aim for a risk to reward ratio of at least 1:3. Also, you should be […]

What percentage of your account, you can risk per trade when you use a dynamic stop-loss? Well, a dynamic stop-loss is all about closing a trade, when the sentiment has changed due to the changes in the fundamental outlook. The trade idea is no longer valid. In this case, you do not wait for your stop-loss to be hit. For example, look at this EUR/USD chart. The pair has a downward bias […]

Before learning about risk management rules, you need to understand what risk means in the context of financial trading. Risk is the potential of bad outcome, which includes Losing money Underperformance of assets Hence, you need rules that define your risk management. This video talks about three main rules that make risk management. Use of stop-loss: Traders should know when to exit an open position, […]

Risk management is something ignored and misunderstood by many traders in forex trading. You might have learnt about using stop-loss, percentage amount you are willing to risk per trade, risk to reward ratio, etc. However, those things are not enough. The key thing in trading is competence. You can compare trading with rock climbing. Without experience, you may be able to get up […]

This video focuses on risk management. It is important in forex trading that you should not risk more than 2% in any single trade. However, this rule is not followed by most beginners in forex trading. They end up blowing their account. You may have made a series of wins. However, a single losing trade could make you lose all if you do […]

Is it worth risking 10% of your trading capital for any single trade? Consider this example. Assume you risk 10% for each trade. Suppose you have 5 losing trades, then you have lost 50% of your trading account. To reach breakeven, you need to earn 100% from winning trades. If you are not going to find winning trades, then you have lost […]

In this video, you will learn how to practice discipline in forex trading? Any trading strategy will fail over time, if you lack the discipline to follow it. So, without discipline, a trading system, and money management rules will have no meaning. Beginners in forex trading may find it difficult to stay with discipline. But you can learn to be disciplined over time by means to practice. […]