Risk Management
Updated
As I promised, I publish the post about risk management.
There are different types of risk management, but I will share one of the best in my opinion.
When you trade futures you have no control over what is happening in the market, the only thing you can counteract is your stop orders and it depends on the volume of your position.
Nothing more depends on you. You can try to control the market with your thoughts, meditations, prayers, you can try anything, but it doesn't work and it's not surprising :)
What is under your control is stop loss. Don't overdo with your trades - it's when you trade too big contracts or when you trade too often.
Here too, there is the considerable cause that pushes you to trade too often: you look at small timeframes and afraid to miss a profitable trade.
Your problem is likely to be that you have a large number of open positions, so I will tell you how big your position should be.
One simple mathematical method will help you.
You have to determine the amount you are willing to risk.
Say your trading account is $100,000. And you need to decide what part of that amount you want to risk on one deal. Someone might say I'm a very risky guy, I'll risk 20%, the other - 15%, and the other only 2-5%.
The more percentage of your deposit you use in a deal, the better chance of zeroing out your deposit.
You have to determine your risk factor.
Usually, in an aggressive strategy, the risk is 10-12%.
You always need to understand what percentage of your money you are willing to risk. If you know exactly what your maximum possible loss and use the appropriate stops, then you can't lose more than you have specified. Of course, you need to take into account some possible slippage.
Let's assume that you set for yourself a maximum loss of $500 on a trade and don't risk more than 10% of your capital. Then the risk factor of my 100K trading account is 10K.
So you only risk $500 per trade and be able to make 20 failed trades straight.
After 3 unsuccessful trades, as a rule, I close the terminal and go out for a walk or drive a car, after an hour I return and make no more than 2 trades
Formula:
Your balance multiplied by risk percentage(e.g. 10%) and divided by your maximum possible loss (stop, e.g. $500) and as a result we get the number of contracts that you can trade.
100,000$ * 10% =10000$
10000$ / 500$ = 20 Number of traded contracts
You can see the formula on the chart
It's all about money management, once you earn more money you can open more positions, and when you get a loss the contract volume decreases too.
Fact of life, if you bet big you are guaranteed to lose big.
Money management must begin before you enter the trade. You should know how many trades you can trade and how much you can risk for each of them.
Never invest more than 20% of your capital if you are experienced, and 10% if you are new with trading.
Don't trade more than six markets at a time.
When you feel sure that you can't lose, it's time for the biggest risk of losing everything.
Fear allows you to be careful.
You must risk no more than 5% of your capital per trade, regardless of your experience.
Remember, the markets aren't sweet candy, they're brutal, and many people, without realizing it, lose their deposits.
The market is a puzzle without instructions.
I hope I a little bit helped to put your puzzle together.
Respect the market he is your teacher
With respect, EXCAVO.
There are different types of risk management, but I will share one of the best in my opinion.
When you trade futures you have no control over what is happening in the market, the only thing you can counteract is your stop orders and it depends on the volume of your position.
Nothing more depends on you. You can try to control the market with your thoughts, meditations, prayers, you can try anything, but it doesn't work and it's not surprising :)
What is under your control is stop loss. Don't overdo with your trades - it's when you trade too big contracts or when you trade too often.
Here too, there is the considerable cause that pushes you to trade too often: you look at small timeframes and afraid to miss a profitable trade.
Your problem is likely to be that you have a large number of open positions, so I will tell you how big your position should be.
One simple mathematical method will help you.
You have to determine the amount you are willing to risk.
Say your trading account is $100,000. And you need to decide what part of that amount you want to risk on one deal. Someone might say I'm a very risky guy, I'll risk 20%, the other - 15%, and the other only 2-5%.
The more percentage of your deposit you use in a deal, the better chance of zeroing out your deposit.
You have to determine your risk factor.
Usually, in an aggressive strategy, the risk is 10-12%.
You always need to understand what percentage of your money you are willing to risk. If you know exactly what your maximum possible loss and use the appropriate stops, then you can't lose more than you have specified. Of course, you need to take into account some possible slippage.
Let's assume that you set for yourself a maximum loss of $500 on a trade and don't risk more than 10% of your capital. Then the risk factor of my 100K trading account is 10K.
So you only risk $500 per trade and be able to make 20 failed trades straight.
After 3 unsuccessful trades, as a rule, I close the terminal and go out for a walk or drive a car, after an hour I return and make no more than 2 trades
Formula:
Your balance multiplied by risk percentage(e.g. 10%) and divided by your maximum possible loss (stop, e.g. $500) and as a result we get the number of contracts that you can trade.
100,000$ * 10% =10000$
10000$ / 500$ = 20 Number of traded contracts
You can see the formula on the chart
It's all about money management, once you earn more money you can open more positions, and when you get a loss the contract volume decreases too.
Fact of life, if you bet big you are guaranteed to lose big.
Money management must begin before you enter the trade. You should know how many trades you can trade and how much you can risk for each of them.
Never invest more than 20% of your capital if you are experienced, and 10% if you are new with trading.
Don't trade more than six markets at a time.
When you feel sure that you can't lose, it's time for the biggest risk of losing everything.
Fear allows you to be careful.
You must risk no more than 5% of your capital per trade, regardless of your experience.
Remember, the markets aren't sweet candy, they're brutal, and many people, without realizing it, lose their deposits.
The market is a puzzle without instructions.
I hope I a little bit helped to put your puzzle together.
Respect the market he is your teacher
With respect, EXCAVO.
Note
I hope there will be more likes than in the previous chart:)
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