⚠️ Risk:Reward & Win-Rate CheatsheetThe reward to risk ratio (RRR, or reward risk ratio) is maybe the most important metric in trading and a trader who understands the RRR can improve his chances of becoming profitable. Basically, the reward risk ratio measures the distance from your entry to your stop loss and your take profit order and then compares the two distances. Traders who understand this connection can quickly see that you neither need an extremely high winrate nor a large reward:risk ratio to make money as a trader. As long as your reward:risk ratio and your historical winrate match, your trading will provide a positive expectancy.
🔷 Calculating the RRR
Let’s say the distance between your entry and stop loss is 50 points and the distance between the entry and your take profit is 100 points .
Then the reward risk ratio is 2:1 because 100/50 = 2.
Reward Risk Ratio Formula
RRR = (Take Profit – Entry ) / (Entry – Stop loss)
🔷 Minimum Winrate
When you know the reward:risk ratio for your trade, you can easily calculate the minimum required winrate (see formula below).
Why is this important? Because if you take trades that have a small RRR you will lose money over the long term, even if you think you find good trades.
Minimum Winrate Formula
Minimum Winrate = 1 / (1 + Reward:Risk)
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Riskmanagementstrategy
Risk Management Strategies Every Trader Should KnowIntroduction
Trading can be a profitable venture, but it also comes with its fair share of risks. In order to succeed as a trader, it is important to have a solid risk management plan in place. In this article, we will discuss key risk management strategies that every trader should know. These include determining your risk tolerance, using stop loss orders, implementing position sizing, diversifying your portfolio, and monitoring and adjusting your strategy.
Determine Your Risk Tolerance
The first step in developing a risk management plan is to assess your own risk tolerance. This is the level of risk that you are willing and able to take on for a given trade. There are several factors that can influence your risk tolerance, including your financial situation, experience level, and personal preferences.
To determine your risk tolerance, consider the amount of money that you are willing to risk per trade, as well as the maximum percentage of your portfolio that you are comfortable losing. It is important to be honest with yourself when assessing your risk tolerance, as taking on too much risk can lead to significant losses.
Use Stop Loss Orders
Stop loss orders are an essential tool for managing risk in trading. A stop loss order is an instruction to sell a security when it reaches a certain price, in order to limit losses. By setting a stop loss order, traders can limit their potential losses and protect their capital.
It is important to set stop loss orders at a level that reflects your risk tolerance and the volatility of the market. Traders should also be aware of the potential for slippage, which is when the execution price of a stop loss order is different from the desired price due to market volatility or other factors.
Implement Position Sizing
Position sizing is another important risk management strategy that traders can use to manage their exposure to risk. Position sizing refers to the amount of money that a trader invests in each trade, and is typically expressed as a percentage of the trader's overall portfolio.
Traders can use different approaches to position sizing, including fixed dollar amount, fixed percentage, or volatility-based position sizing. Each approach has its own advantages and disadvantages, and traders should choose the approach that best suits their risk tolerance and trading strategy.
Diversify Your Portfolio
Diversification is a key risk management strategy that involves spreading your investments across different assets or markets. By diversifying your portfolio, you can reduce your exposure to any single asset or market, and mitigate the potential for significant losses.
There are many different ways to diversify your portfolio, including investing in different types of assets (such as stocks, bonds, and commodities), or investing in different geographic regions or sectors. It is important to carefully consider the potential risks and benefits of each diversification strategy, and to choose a strategy that aligns with your risk tolerance and investment goals.
Monitor and Adjust Your Strategy
Finally, it is important to monitor and adjust your risk management strategy on an ongoing basis. This involves regularly reviewing your trading performance, identifying areas of weakness or risk, and making changes to your strategy as needed.
Traders should be aware of the potential for changes in market conditions or other factors that could impact their risk management strategy, and should be prepared to make adjustments as needed. This may involve increasing or decreasing position sizes, adjusting stop loss levels, or re-evaluating diversification strategies.
Conclusion
In summary, risk management is a crucial aspect of successful trading, and there are several key strategies that traders can use to manage their exposure to risk. These include determining your risk tolerance, using stop loss orders, implementing position sizing, diversifying your portfolio, and monitoring and adjusting your strategy. By taking a proactive approach to risk management, traders can minimize losses and maximize their potential for success.
BTCUSD And Not Buying Silly PricesHey Traders,
Upon this Morns Crypto News/Sentiment surrounding Binance... You have the option to make a decision. Eyes will race to that of the 'New' asset hot in popularity which is Bitcoin.
If you have to trade it, you always want to buy dips to attain value. There is no value really in buying high prices because naturally, you are getting a worse deal if long.
And yes, there COULD be a larger upside in the future. But show me how you can prove at this exact point in time, factually, that this will occur. That is a Discussion and not a fact. This is why you should buy dips, they are facts. Dips are low prices within moves up and therefore naturally retain more value than prices that have already had their wider move.
Now, if you are short, you need to minimise risk enormously because this asset is a HVA. Any shocking news that arrives (may see it with what's going on) can you blow you to smithereens. This is dangerous and often will happen if you are buying highs far away from key moving averages (that you always arrive back to). Often the further away from the 20/40 and further 100/200/500 the lower the market value in the opposite direction.
It's far better to just consistently ONLY buy things when they are cheaper and ONLY exit when they cost more. That is the natural art of dealing anything for long term gains.
Without acting in such way you are simply avoiding reality. If you are after the 'thrill' seeking aspect of Trading.. you WILL lose money. The market is not for thrill seekers it is for those who are in control of both MIND and also RISK. That is because what rules Trading is decisions made in the brain and the longevity of your equity management and damage control when you do make worse decisions. This mitigates the bad times and gets you back on the good.
If you do not manage both accordingly you will suffer, so make sure ya do. Remember Bitcoin only took off a few years ago we are not looking at something which has 30 40 50 years of price action and therefore inherently has greater risk. There CAN be upside. There really can. However, we are where we are and if you do not use factual price then you are guessing.
Trade small and trade safe always. Also, think about how you want your portfolio arranged.
RISKOMETER Based on Your Trading Style ⚠️
Hey traders,
In this educational post, we will discuss the relation of risk to your trading style.
1️⃣ High Frequency Trading (HFT)
It is a complex algorithmic approach that is used to operate on second(s) time frames.
Such a style is considered to be the riskiest one.
With a very high frequency of order execution and sophisticated strategies, it requires a very high level of experience and proper software and hardware for successful operations.
2️⃣ Scalping
It is a manual trading style with operations on minutes time frames.
With the average holding period ranging from minutes to hours, scalping requires a high degree of attention and constant charts monitoring.
Being one of the most profitable trading styles for retail traders, scalping involves an extremely high risk and mental load.
3️⃣ Day trading
The form of speculation in which the traders attempt to make profits within a single trading day.
Occasionally, however, day traders may hold their positions overnight.
Day trading is considered to be slower than scalping, with the trade execution on hourly time frames.
Slower pace drastically reduces risks also limiting the potential gains.
4️⃣ Swing trading
It is a style of trading that is aimed to make profits on swing moves, with an average holding period ranging from days to weeks.
4H time frame is the lowest time frame where swing traders usually operate, and a daily time frame is usually the highest one.
The operations on higher time frame dramatically reduces the noise and degree of manipulations, making that style of trading relatively safe.
5️⃣Investing (Position Trading)
Trading / investing style aiming to make long-term profits.
The average holding time of a position trader may expand to years.
In comparison to other trading styles, investing generally produces the smallest gain. That is, however, compensated by extremely low risks.
Correct understanding of relations between trading styles and potential risks is crucially important for a selection of an appropriate style for you.
Shorter is the holding period and operational time frames, higher is the risk, but higher are the potential gains.
You should pick the style that fits your risk-tolerance and expectation.
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10 Rules of Risk Management
Risk management is the most important aspect of any trading plan. Apart from the mathematical and strategic methodologies to employ, there are several precautions you can adopt as a trader and consider in your decision-making process.
Never risk more than you can afford to lose.
Never forget Rule no.1.
Stick to your trading plan.
Consider the costs like spread, rollover/swap and commissions.
Limit your margin use and track available margin to avoid margin calls.
Always use Take Profit and Stop Loss orders.
Never leave open positions unattended.
Record your performance and adjust as you progress.
Avoid high volatility periods like economic news releases.
Avoid making emotional decisions when trading.
We apply risk management to minimise losses if the market tide turns against us after an event. Although the temptation of realising every opportunity is there for all traders, we must know the risks of an investment in advance to ensure we can endure if things go sour. All successful traders know and accept that trading is a complex process and an extensive risk management strategy and trading plan allow us to have a sustainable income source.
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What do you want to learn in the next post?
RISK MANAGEMENT STRATEGIES There are several risk management strategies that can be used to help mitigate potential losses and increase the chances of success in any investment or trading endeavor. Here are a few common risk management strategies:
Diversification is an essential risk management strategy that involves spreading your investments across different markets, asset classes, and securities. The goal of diversification is to reduce the overall risk in your portfolio by minimizing the impact of any single investment or market on your portfolio.
When you diversify your portfolio, you spread your investments across different asset classes such as stocks, bonds, and commodities. You also diversify across different markets, such as domestic and international markets, and across different sectors, such as healthcare, technology, and consumer goods.
By diversifying across different asset classes, markets, and sectors, you can help balance out potential losses in any one area. For example, if you have all of your investments in the stock market, you are vulnerable to a significant loss if the stock market experiences a downturn. However, if you have some investments in bonds or commodities, those investments may perform well during a market downturn, helping to offset your losses in the stock market.
Additionally, diversification can help you take advantage of opportunities in different markets and sectors. For example, if the stock market is experiencing a downturn, other markets, such as commodities or international markets, may be performing well. By diversifying your investments, you can take advantage of these opportunities and potentially improve your overall returns.
It's important to note that diversification does not guarantee a profit or protect against loss, but it can help reduce the overall risk in your portfolio. However, diversification requires careful planning and ongoing management. You should regularly review your portfolio and make adjustments to ensure that your investments remain diversified and aligned with your goals and risk tolerance.
Diversification is a critical risk management strategy that can help reduce the impact of any single investment or market on your portfolio. By spreading your investments across different markets, asset classes, and securities, you can help balance out potential losses and take advantage of opportunities in different areas.
Setting stop losses is a vital risk management strategy that involves setting a predetermined price point at which you will sell a security to limit potential losses on any given trade. Stop losses are commonly used by day traders and other active investors to protect their portfolio from large drawdowns and minimize potential losses.
The concept of a stop loss is relatively simple. When you buy a security, you set a price point at which you are willing to sell the security if the price drops to a certain level. This level is known as the stop loss level. If the security's price reaches the stop loss level, the security is sold automatically, limiting your potential losses.
The main benefit of using stop losses is that they allow you to manage risk effectively. By setting a stop loss, you limit the amount of money you can potentially lose on any given trade. This can help prevent large drawdowns and protect your portfolio from significant losses.
Stop losses are also valuable because they help you avoid emotional trading decisions. When you have a predetermined stop loss level, you can take the emotion out of trading decisions. This can help prevent you from holding onto losing trades for too long, which can result in even greater losses.
However, it's important to note that setting stop losses is not foolproof. In fast-moving markets or markets with low liquidity, a stop loss order may not execute at the desired price, resulting in losses greater than expected. Additionally, setting stop losses too close to the market price may result in the order executing prematurely, potentially missing out on gains.
Setting stop losses is an important risk management strategy that can help protect your portfolio from significant losses. By setting a predetermined price point at which you are willing to sell a security, you can limit potential losses and avoid emotional trading decisions. However, it's essential to use stop losses carefully and adjust them as needed to ensure that they are aligned with your goals and risk tolerance.
Position sizing is an important risk management strategy that involves determining the appropriate amount of capital to allocate to each trade based on the level of risk involved. Position sizing is critical because it helps you manage the risk in your portfolio and avoid overexposure to high-risk positions.
The idea behind position sizing is to ensure that the amount of capital you allocate to each trade is proportionate to the level of risk involved. For example, if you're taking on a high-risk trade, you'll want to allocate less capital to that trade to limit the potential losses. Conversely, if you're taking on a low-risk trade, you may allocate more capital to that trade.
Position sizing can be calculated in various ways, but the most common method is to use a percentage of your account balance for each trade. For example, if you have a $100,000 account and you decide to risk 2% of your account on each trade, you would allocate $2,000 to each trade.
By carefully managing position sizing, you can limit the impact of any single trade on your portfolio. If you allocate too much capital to a single trade, you run the risk of losing a significant portion of your portfolio if that trade goes wrong. On the other hand, if you allocate too little capital to a trade, you may miss out on potential gains.
Position sizing is also essential for avoiding overexposure to high-risk positions. If you have too much capital allocated to high-risk trades, you run the risk of suffering significant losses if those trades go wrong. By carefully managing position sizing, you can ensure that you have a well-diversified portfolio with appropriate levels of risk.
Position sizing is a critical risk management strategy that helps you manage the risk in your portfolio by determining the appropriate amount of capital to allocate to each trade based on the level of risk involved. By carefully managing position sizing, you can limit the impact of any single trade on your portfolio and avoid overexposure to high-risk positions.
The risk-reward ratio is an important risk management tool that can help you make more informed trading decisions. The ratio measures the potential return on investment against the amount of risk involved in a particular trade. By focusing on trades with a favorable risk-reward ratio, you can increase your chances of success and limit potential losses.
The risk-reward ratio is typically expressed as a ratio of the potential reward to the potential risk. For example, if you're considering a trade where the potential reward is $2,000 and the potential risk is $1,000, the risk-reward ratio would be 2:1. A favorable risk-reward ratio means that the potential reward is greater than the potential risk.
By focusing on trades with a favorable risk-reward ratio, you can increase your chances of success. This is because you're only taking on trades where the potential reward outweighs the potential risk. This means that even if some trades don't work out, you can still make a profit if the majority of your trades have a favorable risk-reward ratio.
One of the benefits of the risk-reward ratio is that it helps you avoid emotional trading decisions. By focusing on the potential reward relative to the potential risk, you can take the emotion out of trading decisions. This can help prevent you from taking on trades with too much risk or holding onto losing trades for too long.
It's important to note that a favorable risk-reward ratio doesn't guarantee success. Even trades with a high potential reward relative to the potential risk can still result in losses. However, by focusing on trades with a favorable risk-reward ratio, you can limit potential losses and increase your chances of success over the long run.
The risk-reward ratio is an essential risk management tool that measures the potential return on investment against the amount of risk involved. By focusing on trades with a favorable risk-reward ratio, you can increase your chances of success and limit potential losses. It's important to use the risk-reward ratio in conjunction with other risk management strategies to ensure that you have a well-diversified and balanced portfolio.
Staying informed is an essential risk management strategy for day traders. It involves keeping up-to-date with the latest news and developments in the market, both on a macroeconomic level and for individual securities. By staying informed, traders can identify potential risks and opportunities and adjust their trading strategies accordingly.
There are many ways to stay informed as a day trader. One of the most important is to keep an eye on financial news sources, such as Bloomberg, CNBC, and The Wall Street Journal. These sources can provide valuable insights into market trends, company news, and other factors that can impact your trades. Many day traders also use social media, such as Twitter and Reddit, to stay informed about the latest news and trends in the market.
Staying informed also means staying up-to-date on changes in regulations, economic indicators, and other macroeconomic factors that can impact the market. For example, changes in interest rates, trade policies, or fiscal policy can have a significant impact on market performance. By staying informed about these factors, traders can adjust their trading strategies accordingly and make more informed trading decisions.
In addition to staying informed about the market, traders should also stay informed about their individual securities. This means monitoring earnings reports, company news, and other developments that can impact the price of a particular security. By staying informed about individual securities, traders can make more informed decisions about when to buy, sell, or hold a particular security.
Staying informed is an essential risk management strategy for day traders. By staying up-to-date on the latest news and developments in the market, traders can identify potential risks and opportunities and adjust their trading strategies accordingly. Staying informed involves monitoring financial news sources, social media, macroeconomic factors, and individual securities to make more informed trading decisions.
Overall, effective risk management involves a combination of these and other strategies, as well as careful planning, discipline, and a commitment to a sound trading strategy. By using these techniques and remaining focused on your goals, you can better manage risk and increase your chances of success in any investment or trading endeavor.
STAY GREEN
What's Risk and Reward ratio vs Profit factorWhat is Risk-Reward Ratio?
The risk-reward ratio is a ratio used in investing that compares the potential profit or gain of an investment to the potential loss or risk that it poses. This ratio is often used to determine whether an investment is worth pursuing or not, and can be a helpful tool in managing risk.
The risk-reward ratio is typically expressed as a ratio of potential profit to potential loss, with a higher ratio indicating a potentially more favorable investment opportunity. For example, if an investment has a potential reward of $10,000 and a potential risk of $5,000, the risk-reward ratio would be 2:1.
Examples of risk-reward ratios can be found in many different types of investments, such as stocks, bonds, mutual funds, and options. For example, a stock that has a potential upside of $20 per share and a potential downside of $10 per share would have a risk-reward ratio of 2:1. Similarly, a bond that offers a potential yield of 6% and carries a potential risk of default of 3% would have a risk-reward ratio of 2:1.
In general, a higher risk-reward ratio indicates a potentially more attractive investment opportunity, as the potential gains are greater than the potential losses. However, it is important to remember that higher potential gains also often come with higher levels of risk, and investors should carefully consider their risk tolerance before making any investment decisions.
What is profit factor?
The profit factor is a metric used in trading that measures the relationship between the profits generated by winning trades and the losses incurred by losing trades. It is calculated by dividing the gross profit of winning trades by the gross loss of losing trades.
A profit factor of greater than 1 indicates that the trading strategy is profitable, while a profit factor of less than 1 indicates that the trading strategy is not profitable. A profit factor of exactly 1 means that the trading strategy has breakeven results.
Some traders consider a profit factor of 2 or greater to be a good measure of a profitable trading strategy, as it indicates that the strategy generates twice as much profit as it incurs in losses.
However, it's important to note that the profit factor is just one metric and should not be used in isolation to evaluate the performance of a trading strategy. Other important metrics include the win rate, average profit per trade, and maximum drawdown.
In summary, the profit factor is a key metric used in trading to evaluate the profitability of a trading strategy, and it can help traders to assess the risk and reward potential of their trades.
Example:
Example 1 - Risk-Reward Ratio:
Let's say you're considering buying a stock at $50 per share, and you believe it has the potential to rise to $70 per share. However, you also recognize that there is a risk that the stock could fall to $40 per share.
In this scenario, the potential reward is $20 per share ($70 - $50), while the potential risk is $10 per share ($50 - $40). This gives us a risk-reward ratio of 2:1, which means that the potential reward is twice as high as the potential risk.
Example 2 - Profit Factor:
Let's say you have a trading strategy that involves making 10 trades over a period of time. Of those 10 trades, 6 are winning trades and 4 are losing trades. The gross profit generated by the winning trades is $6,000, while the gross loss incurred by the losing trades is $3,000.
To calculate the profit factor, we divide the gross profit by the gross loss, which gives us a profit factor of 2. This means that for every dollar you lose on losing trades, you earn $2 on winning trades.
By looking at both the risk-reward ratio and profit factor, you can evaluate the potential risk and reward of a trading opportunity and the profitability of a trading strategy. It's important to keep in mind that there are other factors to consider when making trading decisions, such as market conditions, technical analysis, and risk management strategies.
Profit fixation Profit fixation
There are three main profit-taking strategies:
1. Fixed RR (1:2, 1:3RR).
2. High RR (1:10RR and above).
3. Partial profit taking.
Fixed RR.
When trading with a fixed RR, the trader ignores the situation on the chart and places a take profit at the level of 1:1, 1:2, 1:3, taking into account the commission. This approach has a high win rate and also relieves the trader from feeling greedy. You do not need to select targets, accompany the position and worry about a random factor that the price may react to. We think that many people are familiar with the situation when the take is put on a lay, the price reaches 1:5R without removing the minimum, and then hits the stop.
The weak side of the strategy is that it has limited profit potential. Often when trading with the trend, you can get more than 2 or 3%.
High RR.
According to this strategy, a position is opened on a lower timeframe, and targets are allocated on a higher timeframe in order to set a short stop and a long target. On the other hand, this does not prevent you from using a fixed take profit level.A. At one time, Liquidity traded high RR and set a take at the level of 1:10, regardless of the targets on the chart.
Many in this strategy are captivated by mathematics. With a risk-reward level of 1:10, a win rate of 10%-20% or 1-2 profitable trades over a distance of 10 positions is enough not to be unprofitable.
And yet, this strategy can harm the trader. If the price does not reach the marked targets, you will not make a profit even if you did everything right. This puts a lot of pressure psychologically, especially when it was possible to take 3-5% and close the position in plus.
You may get the impression that there are only two extremes: earning rarely, but a lot, or little, but often. But there is another strategy that helps to balance and find a happy medium.
Partial profit taking.
The trader fixes the profit in parts as the selected goals are achieved. Targets can be determined both by schedule and by risk-reward ratio. For example, you fix 50% of the position at 1:3, 25% at 1:5 and 2 more5% at 1:10. Either 50% on FTA and the rest on potential reversal zones.
This strategy will help you capitalize on your trading ideas, reducing the risk of losing profit when the price falls short of the marked targets.
Partial fixation will be useful for novice traders because it creates a positive experience and demonstrates what you are capable of.
Do not jump from extremes to extremes and look for balance.
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✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes.
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How to survive in the market for the long-term?
In the market, regret is a frequent word. Many people face the complex investment market and often feel fear, hesitation, and regret, whether it's before buying, after buying, after selling, or just watching without buying. How to avoid this phenomenon? The fear, hesitation, and regret are largely due to not knowing how to manage positions and follow the crowd. Often pursuing high probability profits results in the opposite.
Risk management is an unavoidable issue when it comes to this. Whether you are a financial master or an individual investor, the importance of risk management is paramount. To relax and operate in the market, you need to face your current situation, make correct judgments on the profit and loss ratio, determine your operating frequency and position management, and give yourself correct psychological guidance.
Everyone's personality is different, and their risk tolerance and trading styles are also different. There is no strategy that is 100% accurate, but if you want to survive in the market for a long time, you need to control risk. Don't be afraid of losses. Losses are inevitable, but the key is how much loss you can tolerate. This is the core of risk management. For small losses, we need to prepare ourselves psychologically. This is a link in risk management. Don't rely on luck. The losses brought about by a lucky mentality are incalculable.
About 70% of the time in market fluctuations is in oscillation, and only about 30% of the time is in a unilateral surge or decline. Therefore, accumulating small victories is the magic weapon for long-term success. Always wanting to go all-in and make a big move at once may result in missed profits due to not exiting in time. No matter what state you are in now, I hope I can bring you a little bit of help!
FX Opportunities 2nd MarchWow! As we forecast yesterday, the market is shaping up incredibly.
Today we have brought in some £ pairs as we have some very high probability trades that could be forming. These would be textbook, low risk set ups.
Also a small lesson on NZD/JPY for us all to learn from myself included which I feel could take so many losses off the table for people.
Rushing positions will not help at this point. Be patient and know what to look for. Good luck!
EURAUD 4H #shortAm looking at a strong bearish move, I have labeled my setup to be more clear to you.
Disclaimer: All trading strategies are used at your own risk -
Any content from this page should not be relied upon as advice or construed as
providing recommendations of any kind. It is your responsibility to confirm and
decide which trades to make. Trade only with risk capital; that is, trade with
money that, if lost, will not adversely impact your lifestyle and your ability to meet
your financial obligations. Past results are no indication of future performance. In
no event should the content of this correspondence be construed as an express
or implied promise or guarantee.
None of the content published in this course constitutes a recommendation that
any particular security, portfolio of securities, transaction or investment strategy
is suitable for any specific person. None of the information providers or their
affiliates will advise you personally concerning the nature, potential, value or
suitability of any particular security, portfolio of securities, transaction,
investment strategy or other matter.
Breakout/Channel/TrendlineCHFJPY successfully broke out the channel and retested the channel. It seems like we are really having a bonce upwards as expected, our trades are opened and running. Wish you all the best. Lets download Success.
What I Do After I Lose A TradeI noticed I’m still in AUDNZD, which is in good profit. Price made a new high, and my first action was to move the trade to break even. At the same time, I noticed I lost a trade on NZDCHF which I set a pending order for this morning.
What I did next was a reaction to the loss. I immediately sought a trade on a currency pair that was not on my list.
Once I did that, I heard a voice saying, STOP DOING THAT!
This is a repeated action I do when I lose a trade. Instead of feeling the loss, I try to medicate it by looking for something else to do.
As soon as I realized this, I wrote that down as a limiting belief and then wrote down what I believe about the market.
Limiting Belief: Losing a trade makes me feel like I need to look for a trade on another pair to make my money back.
Action to take: take a slight loss. It’s better than letting a losing trade run.
Belief: Small losses tell you the price has reversed and to be patient to wait for the following setup on the same currency pair.
Belief: The market changes. I have to adapt quickly because the price movement will change, which means every trade is unique.
Belief: Make trading a fun puzzle to figure out. It will become overwhelming if I work on too many puzzles simultaneously.
What I noticed last was how I felt. Usually, I feel a tight pinch in my chest before I get on my charts. Its anxiety. I didn’t feel it this morning. I felt relaxed.
After dealing with years of anxiety I can feel it decreasing the more I write out my thoughts and beliefs and see how they are what I trade.
Experiencing today's lose I had no feeling just a reaction I will work hard to not do again.
What reactions do you have when you lose a trade. What are thoughts and feelings? If negative what can you now begin doing that will help you adapt to price movement with a clear mind and well thought out actions?
If you found value in this shared moment of my trading journey please like this post and comment. You're not alone in this trading world. Let's talk it out.
Risk Management Strategy Spot trading can yield high returns, but it’s crucial to have a well-defined strategy in place before diving in. This entails analyzing the project, determining the size of your entry, and devising contingency plans in case of unforeseen circumstances.
In this article, we’ll discuss our approach to spot trading and share our insights with you.
Before entering the spot market, it’s critical to categorize the various assets available. With over 10,000 different projects to choose from, each with its own unique features, we sort them into three categories based on risk level:
High Risk: This category includes projects that are prone to exit scams or are high-risk due to their small capitalization. We pledge no more than 0.5% of our total capital to these projects since they pose a significant risk to our portfolio. However, if they perform well, we may see significant returns from just one high-risk transaction.
Middle Risk: Projects in this category have an average market capitalization of between $50 million and $500 million. We can pledge up to 1% of our allocated capital to these projects, which are less likely to collapse but still carry a degree of risk.
Low Risk: This category includes established mastodons of the cryptocurrency market with a high market capitalization, such as those in the top 50 of Coin Market Cap. We can pledge up to 3% of our allocated capital to these projects, as they are less risky but still carry some risk.
To diversify our portfolio, we allocate our capital as follows:
Cash reserves: 30%
High Risk: 15%
Middle Risk: 30%
Low Risk: 25%
While our portfolio may seem risky, we aim to earn returns rather than simply preserving our capital. However, in the current bear market, we adjust our strategy to focus more on cash reserves:
Cash reserves: 70%
High Risk: 5%
Middle Risk: 15%
Low Risk: 10%
With over 70% of our portfolio consisting of stablecoins, we can buy back into the market at more favorable prices during drawdowns.
In short, a risk management strategy should be tailored to each market. In a bull market, a riskier strategy with more high- and middle-risk projects may be appropriate, while a bear market calls for a risk-free strategy with a small percentage of high- and middle-risk projects and the majority in stable assets.
In summary, our risk management strategy for spot trading is designed to minimize losses and prevent undue stress. Consider using it as a starting point for developing your own strategy, and monitor its effectiveness over time.
Why leverage size is not matterHello dear community.
Each trader is a part of discussion about leverages. Some of them say that it's risky, another just playing in casino with 50x.
But why leverages is not matter, and how do not lose all deposit? Read below.
Firstly, you need to know about 2 things.
Support line
Risk management
Support line
I am confident that you know about support line a lot of info, but just reminder.
Support line is a zone when price jump back multiply time and coin start growing again.
Support line can be detected on each timeframe. But for our case we need to see on 1D and 4H timeframe.
Risk management
If you are trading without risk management, you will be bankrupt. However, what is that?
Risk management is the amount of funds in cash or percentage that you can risk in some trade.
For example:
You trade BTCUSDT with deposit 1000 USDT.
Before you make a trade, you need to decide how many USDT or % will be your risk. The funds that will be lost in the worst scenario of trade.
It can be 3-5% for start.
In USDT, it will be 30 - 50 USDT.
What is next?
Next, you should calculate your position size. I suggest using next formula:
Position size = Risk /(Buy level - Stop loss).
It means if closer to stop-loss you buy order the bigger position you have.
Buy level
Current chart has support zone on 22546-22261.
I suggest split your buy order on few slices on this zone.
Stop loss
I usually set stop loss behind this zone, in current example my stop at 22222
In this case, the formula will be:
50/(22403,5 - 22222) = 0.276 BTC is your position with risk in 5%.
In this example, will be ~6X leverage.
But if increase risk until 10%, leverage will be 12X.
Trading is not about casino, is about math.
Good luck and have good trades!
Plan for XAUUSD with CPI AnnouncementOANDA:XAUUSD
Gold has been trading in the range since last Friday (10th February 2023). It is clear that speculators and investors are waiting for something: maybe some economic indicators like CPI will decide the movement of Gold by today (14th February 2023)
Within the 1H timeframe, It is clear that gold has a strong chance of continuing its downtrend if it breaks below the trading range of 1850-1865 with the the following key support levels:
1st Support at: 1835
2nd Support at: 1825
Key Support at: 1800
On the contrary in a bigger picture of Day timeframe, Gold can still push for another leg upward as the price action has slowed the downward movement. If CPI number comes out in favor of Gold then it has a chance of testing the following key resistance when it breaks the range between 1850-1865 upward:
1st Resistance at: 1880
2nd Resistance at: 1885
Key Resistance at: 1900
The most importance part of all; Place a trade where the Risk to Reward favors in the direction that you choose!!!
🧊The Iceberg Illusion In TradingThe iceberg illusion in trading refers to the perception gap between what people think trading is and what it actually means. Many people see trading as a simple way to make quick profits and accumulate wealth, with the idea that all one has to do is buy low and sell high. However, the reality is far more complex. Under the surface of what appears to be a straightforward process lies a world of risk, stress, and uncertainty. Trading is not just about making money, it requires discipline, patience, and a deep understanding of the markets. Those who don't understand the true nature of trading may face financial loss, depression and failure, much like the hidden dangers beneath the surface of an iceberg. Success in trading often requires much more than just a basic understanding of market trends and patterns, and those who dive in without being fully prepared may face dire consequences.
🔷 Above the Iceberg
Above the iceberg, people often see the glamorous and attractive side of trading, characterized by success, wealth, and financial independence. They imagine traders as confident and knowledgeable individuals, making smart decisions and reaping the rewards of their investments. The image of traders making large profits in a short amount of time is one that is often perpetuated by media and popular culture. People often see the stock market as a fast-paced, exciting place where opportunities for financial gain are abundant, and the idea of being able to control one's financial future through trading is alluring. This perception of trading often creates a rosy and idealized image of what it entails, leading many to believe that success in the markets is easy to achieve.
🔶 Bellow the Iceberg
Below the iceberg, lies the reality of the challenges and difficulties that traders face on a daily basis. There are many hidden risks and uncertainties that are not immediately apparent to those who are new to the world of trading. Some of the things that people don't know that lie beneath the surface of the iceberg include:
🔸 Market volatility:
The stock market is a highly volatile environment, and prices can fluctuate rapidly and unpredictably. This can make it difficult for traders to manage their positions and minimize their losses.
🔸 Emotional stress:
Trading can be a highly emotional experience, and the pressure to make the right decisions can be immense. Many traders struggle with anxiety, fear, and depression, particularly when faced with losing trades.
🔸 Lack of understanding:
The stock market is complex, and it can be difficult for traders to understand all of the factors that influence market trends and prices. This can lead to costly mistakes and an increased risk of financial loss.
🔸 Competition:
The stock market is a highly competitive environment, and traders must be able to keep up with fast-moving markets and make quick decisions based on complex data and information.
🔸 Long-term success:
Many traders are focused on short-term profits and may not consider the long-term impact of their trading decisions. Achieving lasting success in the markets requires a well-thought-out strategy and a strong understanding of the markets and the risks involved.
🔸 Timing:
Successful trading often requires precise timing, as markets can change rapidly and prices can fluctuate. Traders must have a deep understanding of market trends and be able to make quick decisions to take advantage of opportunities.
🔸 Risk management:
Trading involves risk, and traders must be able to manage their positions and minimize their losses. This requires a well-planned and executed risk management strategy, including setting stop-losses and taking profits at appropriate levels.
🔸 Knowledge and experience:
Trading is not just about buying low and selling high. It requires a deep understanding of market trends, economics, and financial analysis, as well as years of experience to develop a successful trading strategy.
🔸 Discipline:
Trading requires discipline and patience, as well as the ability to stick to a well-thought-out strategy. Many traders make impulsive decisions based on emotions or market rumors, which can lead to financial losses.
Welcome to the hardest game in the world.
👤 @AlgoBuddy
📅 Daily Ideas about market update, psychology & indicators
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Learn Risk to Reward Ratio | Forex Trading Basics
Hey traders,
Planning your every trade, you should know in advance the profit that you are aiming to make and the maximum amount of money you are willing to lose.
In this educational article, we will discuss risk reward ratio - the tool that is used to compare your potentials losses and profits.
Let's start with an example. Imagine you see a good buying opportunity on EURUSD. You quickly identify a safe entry point, your take profit level and stop loss.
From that trade you are aiming to make 100 pips with a maximum allowable loss of 50 pips.
To calculate a risk to reward ratio for this trade, you simply should divide a potential gain by a potential loss:
R/R ratio = 100 / 50 = 2
In that particular example, risk to reward ratio equals 2 meaning that potential gain outperform a potential loss by 2.
Let's take another example.
This time, you decide to short USDJPY.
From a desirable entry point, you can get 75 pips with a potential loss of 150 pips.
Risk to reward ratio for this trade is 75 divided by 150 or 0.5.
Such a ratio means that potential loss outperform a potential gain by 2.
Risk to reward ratio can be positive or negative.
If the ratio is bigger than 1 it is considered to be positive meaning that a potential gain outperforms a potential loss.
If the ratio is less than 1, it is called negative so that potential loss is bigger than potential risk.
Knowing the average risk to reward ratio for your trades, you can objectively calculate the required win rate for keeping a positive trading performance.
With R/R ratio = 0.5
2 winning trades recover 1 losing trade.
You need at least 70% win rate to cover losses of your trading.
With R/R ratio = 1
1 winning trade, recover 1 losing trade.
You need at least 50% win rate to compensate your losses.
With R/R ratio = 2
1 winning trade recovers 2 losing trades.
You need at least 35% win rate to cover losses of your trading.
Trading involves extremely high risk. Risk to reward ratio is a number one risk management tool for limiting your risks. Calculating that and knowing your win rate, you can objectively decide whether a trade that you are planning to take is worth taking.
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I would lie to you that I am very special!This is an event that has spread all over the real and virtual space these days
I am better than you, more beautiful than you, smarter than you
But the reality is something else
But we know the truth!
You and I are human, we have our merits and demerits, we all lied, we were all kind, we were both good and bad!
we are equal ..
With this introduction, I wanted to get here that we in the financial markets are involved with an equal scale of types of risk
It means that if I am facing some risks, you are also facing almost the same risks!
So, of course, if we are profitable but have a low win rate, or vice versa, we have a high win rate, but we may not be profitable in the long term.
Accepting this risk is the most basic step of entering the market.
I think money management and risk management are the only keys to success
Our learnings about technical and fundamental analysis only play a role in reducing or increasing the risk of our trade!
CONCEPTS OF STRATEGYTo build your strategy ,there are many factors that represent the columns of the building .
These factors named by me the concepts of building the strategy.These include:
1-trading psychology
2-risk management
3-position sizing
4-trading plan
These are the main factors .
There is also an auxillary factors i will mention it later on
🔹Trading hacks: STOP LOSING money in trading🔹Hey everyone, in this video we will talk about why you need to switch to demo account if you're losing your real money in trading.
Learn Why Do You Need a Stop Loss 🟥
Hey traders,
Talking to many struggling traders from different parts of the world, I realized that the majority constantly makes the same mistake: they do not set a stop loss.
Asking for the reason why they do that, the common answer is that
these traders consider the manual position closing to be safer, implying that if the market goes in the opposite direction, they will be able to much better track the exact moment to cut loss.
In this article, we will discuss why it is crucially important to set a stop loss and why it is the number one element of your trading position.
First of all, let's discuss what is a stop loss. By a stop loss, we mean a certain price level where we close our trading position in loss. In comparison to a manual closing, the stop loss should be set at the exact moment when the order is executed.
Stop loss allows us limiting the risks in case of unfavorable movements.
On the chart above, I have illustrated 2 similar negative scenarios: 1 with a stop loss being placed and one without.
In the example on the left, stop loss helped to prevent the excessive risk, cutting the loss at the beginning of a bearish wave.
With the manual closing, however, traders usually hold the negative positions much longer, praying for a reversal.
Holding a losing trade, emotions intervene. Greed and fear usually spoil the reasoning, causing irrational decisions.
Following such a strategy, the total loss of the second scenario is 5 times bigger than the total loss with a placed stop loss order.
Stop loss defines the point where you become wrong in your predictions. Planning your trade, you should know in advance such a point and cut your loss once it is reached.
Never trade without a stop loss.
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DAY TRADING 101: How to Get StartedHello guys! Day trading is a popular way for traders to make money by buying and selling assets within the same trading day. However, before you begin day trading, it's important to understand the basics and develop a solid trading strategy. In this post, we'll cover the basics of day trading and provide some tips on how to get started.
First, it's important to understand the different types of securities that you can day trade. Some popular options include stocks, options, futures, and currencies. Each of these securities has its own unique characteristics and requires different strategies, so it's important to choose the one that best fits your goals and risk tolerance.
Next, you need to develop a trading plan . Your plan should include your trading strategy, the securities you plan to trade, and your risk management techniques. It's also important to set realistic goals and be prepared to stick to them.
Once you have a trading plan in place, you need to practice . You can do this by using a simulation or paper trading account. This will allow you to test your trading strategy and learn from your mistakes before you start risking real money.
Another important thing to consider is your risk management . This means understanding the level of risk you're willing to take and setting stop-losses and profit-taking orders to protect your capital. It's also important to maintain a proper risk-reward ratio, which means that the potential profit should be larger than the potential loss.
In addition to the above, it's crucial to keep an eye on the market and news , as they can greatly impact your trades, so it's essential to stay updated with the latest news and trends. Finally, keep in mind that day trading requires discipline and patience, so be prepared to put in the time and effort to become a successful trader.
To sum it up, day trading can be a great way to make money, but it's important to understand the basics and develop a solid trading strategy. Additionally, you should practice with a simulation or paper trading account, have a proper risk management, stay informed and be prepared to put in the time and effort.
Which type of trading do you prefer?
