Visualizing Risk ManagementI would like to save people from getting burned so after 3.5 years of being in this space here is my advice:
1. It is easy to fall in love with an investment, especially when you believe it could make you rich.
Have belief, but don't be blinded by it. Consider that you could be wrong, late, or even too early.
2. Price can remain irrational longer than you can stay solvent.
Getting chopped up in the range will dwindle your capital that can be very hard to recover.
3. If everyone knows it, the market will no longer follow that path.
The moment you determine a certainty is the moment you're destined to learn some lesson.
4. Doing nothing is hard.
It feels good to be all-in, but this pushes emotions to the brink for new investors that can't stop looking at the screens.
Trading/investing can be as simple as drawing one horizontal line on a chart.
Price goes above and you're in.
Below and you're out.
Numbers don't lie.
Develop a plan and cut the emotion.
Risk-management
Scaling Into a PositionEver see price nearing a zone of interest and wonder when is the right time to get into a position?
Try scaling in!
Taking a few smaller positions as price moves into your area can allow you to get into a trade while managing risk along the way.
This can help you to not miss moves by waiting too long AND to not overleverage by taking a large position too early.
Take a look at this recent move on BTC as an example.
DOGEUSD - STILL NOT ENOUGH SUPPORTYesterday I shared my opinion about the price evolution of Doge. Today I will share you my pending position on Doge as well. Yesterday I told you that there is an opportunity to buy from 0.40$. If you did that, congrats to you, but you can buy from 0.25 ( that means nearly 50% discount from current price). Right now I am planning to play with the hype, but only from fundamental values. BTC is still in a corrective move, the market need to kick out the weak hands. If you want to play safe, you can use my setup in order to have a profitable and low risk reward trade. (Max loss on this trade -9% expected profit +290% - since DOGE is a highly speculative coin I had to increase my SL level to 9-10% in order to survive the correction). See the charts attached below:
Consider to join our community to get more of this kind for Free.
community.protradersnetwork.com
#forextrader #forex #forextrading #forexsignals #forexlifestyle #trading #money #cryptocurrency #trader #bitcoin #forexmarket #forexlife #technicalanalysis #stockmarket #forexanalysis #forexmentor #daytrading #forexgroup
Liquidation Levels Trading FuturesI've seen lots of people getting liquidated on there longs on this BTC dump. This is why I think people never take into consideration risk management or don't know how it actually works. Maybe this can help a lot of people and help them clarify things. YES, the getting rich quick by leveraging is a probability, but if you ask me, I would consider it luck in the 25x to 100x than in lower leverage positions.
I think the getting rich quick scheme in crypto or FX is never talked enough and should always be addressed with proper risk management.
This analysis is considering you long your whole portfolio with leverage (which most people do).
If you want to long with high leverage, use 1% or 2% of your portfolio, try it out in Isolated mode first and see what it is all about. Your losses will teach you how to be a better trader, but never ever lose your ammo in your first try.
I'll do a follow up of this chart with potential gains by leveraging.
Why chasing % should be your focus and not pips!Here we look at 3 traders, all claiming to have a winning trade with 100 pips - however, with very different % gains on their accounts.
The main part of trading is profitability, you can not pay your bills with pips.
This explains what you need to focus on and be aware of!
Hope it helps,
Regards
Darren
📝 Using Fixed Equity Percentage VS Dollar Amount?! 💣Today we are comparing fixed equity percentage vs. fixed dollar amount to show how fixed % has an edge.
The chart above should mostly be self-explanatory.
The only real note here is that while the difference can be slight in the short term, and while static dollar amount does have an advantage in some instances, over the long term the data suggests the % based method is the way to go.
Hope this helps some! :D
'Position Sizing' for beginners - XAUEURIn this example I'm gonna show you how important is the entry point.
With same levels for stop-loss and take profit, one position will give you the opportunity to earn 3 times more than the other.
It doesn't mather if the position is a loss or a win, I just want to visualy show you the importance of the entry.
WTI Mid-Term Technical Analysis - Potential and Risk Here is a more in depth analysis of yesterday's published idea. WTI has appeared to have confirmed a new bottom with the EMI after closing repeatedly above bottom support (scripting thanks to @bonic) signaling a heavy buy signal on the weekly and monthly charts. We have to manage risk here. I have place a strong watch on the bottom uptrend support around 1.8 up to potentially 2.5 and so on. Stop loss should be used accordingly how low depending on how much you are willing to risk. Though that should be pretty clear if you stay up to date on analysis. immediate resistance but according to EMI appears likely to break through both 2.37-.39 and 2.55-6 resistance lines. If it fails to do so you may consider selling to play safe. Read the charts.
bounce off long term support
same bounce with a more current date range
Risk ManagementAs 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.
Bankroll and Risk Management, Risk to Reward Ratio - EDUCATIONALIn this example I am showing you how important is RIsk Management in your trading system.
You could be the most talented trader in the world with a natural eye for investment opportunities, and still blow your account with one bad call without proper risk management. No matter how good you are, or how experienced you are, you’re still going to incur losses. Even the best traders in the world suffer losing trades - it’s part and parcel of trading. That’s why risk management is so important to your trading.
One way that you could strike the right balance between reward and risk is to stick to a reward:risk ratio such as 2:1 or even 3:1, where your targeted profits are always double that of your maximum losses. So even if you suffer three losing trades, you’ll only need two profitable ones to ensure your total profits outnumber your losses if you stick to this reward:risk ratio. Although it’s not a general rule to follow, it can help you to visualise a specific approach to risk management.
"It's not important whether you are right or wrong. It's about how much money you make."
That means that you can still win 4/6 trade and you are still loosing money.
In the example showed you can see that investing different amount of money in each trade can drive to a negative ROI even if yours winning rate is over 66% .
EURCAD Update after Stop Loss HitWe forecast for the week ahead:
1) Outline anticipated move
2) Outline Contingency Plan
3) Create trading plan around Price Action (entries planned on H4, H1, H15 dependent on your anticipated exit)- Updates will be provided.
4) Create a Risk management plan for unexpected fluctuations
5) Sit back relax
(See Related Idea Below)
AUDNZD: Trade Update / Risk LessonWhats up guys?
This idea is correlated to the one linked below. The difference between those two is the two yellow boxes. In the first i counted the first level as yellow box wrong and so the trade made another move down. I just wanted to give my follow traders a quick update about how the idea now looks with the correct two yellow consolidation boxes. We do not expect price to rise before another move to the downside. And yes we are still in the trade, which is linked below. Remember using always something between 1-2 percent risk keeps you long term in the game and also protects you from these mistakes. I am only 0.5 percent in drawdown from this trade!
EURUSD AT A DAILY SUPPORT LEVEL SOON Looking at the daily chart of the EURUSD we see for now a clearly bearish trend. But with the upcoming support/resistance going hand in hand with the fibonacci level of 0.5 im looking for another bullish move. A trade setup could look like the green and red box with a pending buy limit order right on the levels.
Core rules to trade with Sinewave & MomentumHope this educational content will help you make a better use of the indicators.
Remember that these rules are just ground rules. Positions sizes and stops positionning will depend on your own risk profile.
This is up to you to find your comfort zone on these parameters.
Indicators used in this video are : PRO Sinewave & PRO Momentum
Don't forget to hit the like/follow button if you feel like this post deserves it ;)
You can check my indicators via my TradingView's Profile : @PRO_Indicators
Kindly,
Phil