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Riskreward

JS-Masterclass: Risk Management #1JS-Masterclass: Risk Management #1 Risk Management in Trading – What does it mean ??? Risk management in trading is following a set of principles for minimizing losses. It’s an essential part of a trading plan that helps to minimize the losses and capture sustainable profits. One of the biggest mistakes traders make is focusing on maximizing profits while overlooking the potential for loss. Unfortunately, that’s the best way for losses to get out of control. Traders need to leave this notion of greed behind them and always think risk first. Once a trader has mastered this principle, the successes will follow. Implementing risk management techniques into your trading strategy can mitigate your risk when the market moves in the opposite direction. Fundamental risk management principles for minimizing losses Whether you are new in trading or an experienced trader, you always need to consider the following principles. They need to be a central part of your trading plan and strategy. The 1% rule The 1% rule in trading is a crucial principle of position sizing. It refers to risking no more than 1% (absolute max. for pro-traders is 2%) of your capital on a single trade. For instance, if you have $50,000 in your account, applying the 1% rule would mean you won’t risk more than $500 on a single trade. Some traders use the 2% rule to increase potential profits, but that amplifies potential losses, too. Sticking to the 1% rule will limit your risk on any given trade and help you preserve your equity. New traders should start with even lower risk levels. Stop-Losses Stop-loss orders are sell orders that trigger automatically when a traded security’s price reaches a lower, pre-specified price. They can help you mitigate losses on trades that don’t pan out the way you hoped. For instance, if you buy a particular stock at $32 per share, you could put a stop-loss order at $30 to close the trade if the price drops below $30 per share. Amateur traders should work with stop loss orders that will automatically trigger when your pre-defined stop-loss is being hit. This avoids a mistake that every trader tends to do – go in with a stop-loss plan but then deviate from it when things go against you. Using stop-loss orders is key to having complete control over your positions, particularly when engaging in day trading. The risk/reward ratio The risk/reward ratio is a measure for calculating expected returns for every dollar you risk on a particular trade. For instance, if your risk/reward ratio is 1:2, you could earn $20 for every 10 dollar you risk. It’s crucial to calculate the ratio after you’ve decided on your stop-loss and take-profit orders. If the ratio doesn’t match your requirements, you need to wait for a more profitable trade. Here’s how to calculate your risk/reward ratio: RRR = (Entry price – Stop-Loss) / (Profit Target – Entry price) If dividing the potential risk with the possible reward results in a value below 1.0, your potential profit is more significant than your potential loss. Make sure you maintain a favorable risk/reward ratio and look for ways to improve it consistently. IN order to be able to do that, you need to have a trading log book. The Batting Average The Batting Average helps you compare your winning and losing trades. Dividing your total number of wins by the total number of trades will help you analyze your past performance and identify areas for improvement. A ratio above 0.5 (or 50%) shows your trading strategy is working. Suppose you had 60 winning trades and 40 losing trades. Your Batting Average is 60%, which means you have more winners than loosers. Combining your Batting Average with your risk/reward ratio will help you manage potential losses more effectively. Here is a table which helps you better understand the relationship between the risk/reward ratio and the Batting Average: The table shows that you should have a minimum batting average or 40% or better. Many traders would consider themselves as so called ’2:1’-traders. This means they always try to have a profit of their winners at least 2x their pre-defined risk (stop-loss). As you can see in the table, ‘2:1’-traders have built in failure in their trading strategy as they can be wrong more often than right and still make tons of money – a ‘2:1’-trader can be incredibly successful at a batting average of only 40%. This means the ‘2:1’-trader can only have 4 winners out of 10 trades and still be highly successful.
BITSTAMP:BTCUSDEducation
by JS_TechTrading
WHERE IS THE BITCOIN BOTTOM?? IS IT ALREADY IN??So the FTX mess really destroyed the potential that crypto had to rally. The DXY broke down as we predicted hitting our third target on Friday, letting the stocks and currencies rally against the dollar. However, crypto was left out of this rally because of the FTX mess. So where is the next opportunity?? After not holding 19600 and breaking the 18500 support that we held for over a month, BTC looks to head lower and is in the middle of nowhere. - As long as we're below 18500- 19600 we are bearish until we reach 12200- 13000. THERE IS NOTHING IN BETWEEN, any long from here would be pure gambling and not a profitable strategy in the long run. \ WHAT TO DO? - Hold on to your money until a trade opportunity arises, which will either be a bullish edge at around 12k or a bearish edge between 18500-19600. Moreover, - We have massive support as shown around 12k. We also have the PCZ of a massive bullish sark around 11.2k, where we could wick to should we head to 12k.
COINBASE:BTCUSD
by SynergyTradingSetups
❗️THE BIGGEST LIE ABOUT RISK REWARD RATIO❗️ What is risk-reward ratio — and the biggest lie you’ve been told: 📚The risk-reward ratio (or risk return ratio) measures how much your potential reward (or return) is, for every dollar you risk. 📚For example: If you have a risk-reward ratio of 1:3, it means you’re risking $1 to potentially make $3. If you have a risk-reward ratio of 1:5, it means you’re risking $1 to potentially make $5. You get my point. ⚠️Now, here’s the biggest lie you’ve been told about the risk reward ratio: “You need a minimum of 1:2 risk reward ratio.” This statement is incorrect! Because the risk-reward ratio is meaningless on its own. 📚Here’s an example: Let’s say you have a risk reward ratio of 1:2 (for every trade you win, you make $2). But, your winning rate is 20%. So out of 10 trades, you have 8 losing trades and 2 winners. Let’s do the math… Total Loss = $1 * 8 = -$8 Total Gain = $2 * 2 = $4 Net loss = -$4 By now I hope you understand the risk reward ratio by itself is a meaningless metric. Instead, you must combine your risk-reward ratio with your winning rate to know whether you’ll make money in the long run (otherwise known as your expectancy). 📍THEREFORE: The key to success is the combination of the RR and Win Rate in such a fashion that yields a positive return. 📙Example: 🔘If your RR is 1:1 then you start making money with 51% win rate and above. 🔘If your RR is 1:1,5 then you start making money with 41% Win rate and above. 🔘If your RR is 1:2 then you start making money with 34% win rate and above. 🔴The higher the RR the lower is the breakeven Win Rate! Hope You get the idea, guys. Thanks for your time, see you in the next article😉
BITSTAMP:BTCUSDEducation
by SignalProvider
4
🏆 10 Trading Rules For Success 🏆🏆 Accept the losses . Losses are inherent in trading. There is no earning trader who will not suffer a loss from time to time. In the case of trading, a mistake involves a loss of capital, which can be painful at the very beginning of learning, but as you develop your skills and expand your range of competencies, you begin to understand that it is impossible to successfully win against the market without occasionally incurring a cost for this struggle in the form of losing trades. 🏆 Don't Risk Money You Can't Lose . Playing the financial market involves constant risk in which the most at risk is our capital which we trade. We can't afford to bet with money we can't lose, by which I mean money meant for living, savings, family money, selling usable items to fund an account with a broker. There is always the temptation that if only we had a bigger trading account we would play better and take less risk, which is of course nonsense. No matter how much money we trade with, whether it's hundreds, thousands or even hundreds of thousands we will always be tempted to play with even more money to make profits even bigger, unfortunately, most likely the only thing that increases is the loss on the trading account. Each of us must find the right amount of money for him, I would suggest at the very beginning to operate with money that we are able to recharge the broker in a few weeks, for some it will be 10% and for some 30% of monthly income. 🏆 Treat Trading Like a Business . Trading is such a business venture of ours, starting with the capital we have to put up to get into it, then developing a strategy that will bring us profits, after protecting ourselves from losses, including costs such as (cost of opening a trade, swap, spread), taxes. We can't treat trading as a hobby or as a job from 8-8. Profits on the financial market are not so predictable that we can say with a clear conscience how much we'll earn next month, and what's more, it may turn out that instead of earning, we'll lose. As for the fact that trading should not be considered a hobby, I can only add that trading requires much more focus and commitment than typical hobby activities, inherent in it is the theme of making and losing money, which for most is a very emotional subject. 🏆 Control Your Emotions . Control of emotions is a key issue in any field if we talk about the master level, from many interviews of professionals in their fields we can repeatedly hear about how control of emotions is of great importance in their field especially on the results they get. As trading is a competitive field. Someone wins someone loses. As our earned money is at stake, I don't need to stress that this doesn't make the whole thing any easier. The most important thing is to realize that emotions will occur and instead of suppressing this fact we should accept it. In order to control emotions, the most important element is to realize that we are under its influence. Because taking action under the influence of some extreme emotions is simply a mistake and it is best in such a case to step away from trading for a day and sometimes even a week to simply cool down. One of the best ways to reset your emotions is to sleep, take a nap and even meditate, and for all those who think that meditation is not for them, but only for tree huggers, I would like to introduce you to one of the famous personalities from the world of investment, which is Ray Dalio, who since 1985 has served as co-head investment director of the world's largest hedge fund Bridgewater Associates. Whose fortune amounts to $19.1 billion and has repeatedly mentioned that transcedental meditation was the best investment he made in his life. 🏆 Manage risk . Such a broad topic that I will prepare a separate post for it, in short, we need to determine what % of capital we can devote to one concluded transaction, in my opinion we should not risk more than 1 to 2% of capital per position. In my opinion, we should not risk more than 1 to 2% of capital per position. We must also take into account the possibility of correlation, because what does it matter if we open 10 transactions with a rate of 2% if all of them are concluded on correlated markets such as forex or stocks. Then our risk is no longer 2%, but in the worst case 20%. 🏆 Stay disciplined . Learning to trade should be perceived more as a marathon rather than a sprint, on our way we will meet many disappointments and failures that are inherent in learning any field, we must not give up, we must remain disciplined and focused on the final result, in trading there is no room for distraction and making decisions on the spur of the moment. Markets are not forgiving of any mistakes or distractions, sometimes one moment of absentmindedness can affect the state of our portfolio. As traders, we must remain in a constant circle of learning and acquiring new skills. We will not achieve any results if we approach trading once a quarter. Taking up trading should be considered in the category of a future source of income about which we want to learn as much as possible. 🏆 Know your strategy . We need to know and understand perfectly the reasons and the way to trade, we need to be 100% aware of when to take trades and when we are remote from the market. We need to know what risks we can take on a given taransaction when we close it and what we will have to do (if). 🏆 Forget The Holy Grail . Just forget about it, if you are still looking for an idle indicator that will only give you profitable signals with your only right parameters, forget about success. Trading is something much more broad and deep than just the intersection of two moving averages. There are so many factors at work on traders' decisions that affect price movement that we can't even comprehend with our brains. I'm not saying here that it's not worth using indicators or fundamental data. I mean only not to base your decisions on them and not to get stuck in a vicious circle of testing a new strategy every week. 🏆 Trend is Your Friend . I'm not going to elaborate here. You simply have a higher probability of success playing with the trend and that's it. 🏆 Never stop learning . Never but never stop learning, read everything that falls into your hands and you find valuable at any given time. Watch, listen read about trading meet other traders ask questions and never stop learning. Remember follow my profile fits perfectly into the circle of continuous learning :D 🏆 Like the post? Follow my profile for more!
Education
by InvestMate
5
💸 AUD/CAD Breakout time 💸💸 In today's analysis we look at an interesting opportunity on the aud/cad pair. 💸 Since the beginning of today's session, we can see the strength of the Austarlisian dollar against the Canadian dollar. 💸 Most of the technical analysis indicators signal the possibility of a breakout and divergence from the previous moment when we were at the same price level. 💸 I sense a breakout from the double bottom 💸Risk/Reward ratio: 4.52 (excellent) 💸 If you like the post? Follow the profile!
Long
by InvestMate
2
EURCAD CHART ANALYSISI believe that the last retracement of the price towards the trend line on EURUSD was due to the pressure of the ECB to contain inflation recently. Certainly, there were rumors that the Russia-Ukraine conflict might be taking a turn. Considered the possibility that the Ukraine-Russia conflict would escalate, and sure enough. The best opportunity given this escalation of the conflict was against the CAD, given that it would benefit from the rise in oil prices that the risk-off environment entails.
Short
by Elite_Forex
How do you feel?If you check at least 3/5 on the below we might be in the right place. 1. Depressed 2. Tired 3. Stressed 4. Scared 5. Out of money to buy more I do not know about you but I have been through all of the above over the last 12 months! I made tons of mistakes no doubt about that! BUT i wIll not make the biggest one, panic sell at the bottom or in the first rally! Some things to consider when you try to draw the picture of the next 6-12months 1. Advertising Costs or User Acquisition Costs ⬇ + NPS ⬆ ( What's doing Meow Meow on the roof???) 2. Shipping Costs + Shipping time ⬇ 3. West Disposable Income ⬇ Why is Peter Selling? well, for a buyout to take place at least >50% of shareholders must agree! Now retail holds 39% + the previous 10% of Peter before starting selling makes 49%! you understand how dangerous that was for the Funds that they wanted to take over right? Probably the price is already set! nobody else besides peter is selling here! Now have a look here: Vijay's Contract "Restricted Stock Units. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an award of Restricted Stock Units (“RSUs”) for that number of shares of the Company’s Common Stock equal to $12,000,000 divided by the average closing price of a share of the Company’s Common Stock as reported on Nasdaq during the full calendar month prior to your Start Date, rounded down to the nearest whole share + "Stock Options. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase that number of shares of the Company’s Class A Common Stock equal to $16,800,000 divided by the average closing price of a share of the Company’s Common Stock as reported on Nasdaq during the full calendar month prior to your Start Date, rounded down to the nearest whole share (the “Option”)" The average closing price prior to the Start Date meaning Dec 21 was around $3.2 giving to Vijay the option in case he would stay with the company to hold around 9m shares or 1.3%. So Peter's 10% + Vijay 1.3% + Retail 39% or more at the time since many got liquidated gives us >50%, if one of the funds holding 3-4% could be on their side the acquisition would be even harder to take place. Imo this is an ordered acquisition and Retail will pay for it! What a beautiful game! Based on 670m shares float here are the % based on (simplywallst.com data and fintle.io) Holders >1% 1. Vanguard together with its passive funds holds 84,819,961 or 12.65% 2. Blackrock together with its passive funds holds 37,909,425 or 5.65% + iShares (owned by Blackrock) 20,564,283 or 3.069% 3. Formation8 Partners 42,192,476 or 6.29% 4. DST Global 38,301,392 or 5.71% 5. GGV Capital, LLC 25,707,499 or 3,83% 6. General Atlantic Llc 16,888,478 or 2.52% 7. Maple Rock Capital Partners Inc. 13,519,000 or 2.01% +5m call option + potential 0.74% 8. State Street Corp 13,349,046 or 1.99% 9. Geode Capital Management, Llc 8,442,463 or 1.26% 10. Comprehensive Financial Management LLC 8,406,736 or 1.25% 11. Renaissance Technologies Llc 8,264,800 or 1.23% All of the above players hold together 47.45%! Peter already sold 3.63% and probably going for >5%, when we learn who bought in i think the price would not be where it is now! From the 2021 Annual Report "In addition, in July 2017, FTSE Russell and Standard & Poor’s announced that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Under the announced policies, our multi-class capital structure would make us ineligible for inclusion in any of these indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track these indices will not be investing in our stock." IMO Peter's conversion from B to A opened the door for the acquisition ! Since they will scoop everything from their passive funds! What's the price???? If the deal is done and you are the SMART MONEY wouldn't you like to purchase all the stock available??? I mean look at that depressed 39% that sits there! IMO 2 paths are possible depending on how the markets will do over the next 6-12months 1. If markets do well there will be an explosive rally to $3-5 towards the EoY, I bet most of you will take your money and leave at that point, the volatility (shaking) is going to be insane! RSI constantly overbought on divergence the opposite of what's happening now! 2. If markets do bad then 0.90-0.70 will do. I think a big % of retail will give up on new lows or on the first 100-300% rally. Now IF and i say IF there is a buyout what would be the price? I would like to think of a price higher than the institution's average. Wish right now has no major shareholder (Peter is gone) I think VC's will likely dictate the price. My guess would be something around 4-6x FY23 sales if markets go well! That should be in the range of 4-6b maybe a little higher depending on how sales would look in 23. That translates to a price of more or less $7-9 or Inside the GAP!!! *Peter's Thiel Fund sold all of it's shares on the WSB frenzy for an average of $12 i think in the best best best case scenario that's the ceiling! Do your own research and do not listen and trust nobody! In the end, we are all alone in this game! Keep calm WGMI!
WLong
by Philoslother
10
Risk RewardBINANCE:BTCUSDT Risk Reward is the ratio of risk of loss of potential profit. Your reward should always be more than losses, look for transactions with RR 1:2, 1:3, 1:4 .... Indeed, in case of failure, the next deal should cover your losses and at a distance this will bring a very good result. For example: We take $ 1,000 (this is 100% deposit), 100 transactions (50 profit,50 loses) and the minimum RR 1:2, our risk to the transaction 1% loss, and profit 2%. Let's start with the bad scenario, you made 50 bad deals (the risk of loss for each was 1% or $ 10) 100% deposit -(50 bad transactions*risk 1%) = we get -50% deposit $ 1000 - (50*10 $) = $ 500 Now we are waiting for a white strip and you have made 50 successful transactions (the risk of loss for each was 1% or $ 10) Our RR 1:2, which means at the same time our profit from the transaction is $ 20 100% deposit + (50 successful transactions*profit 2%) = we get + 100% deposit $ 1000 (50*20 $) = 2000 $ Bottom line: Deposit + 50 profitable transactions - 50 unprofitable transactions = + 50% of the deposit (although we made the same number of both good and bad transactions) $ 1000 $ 1000 (100%) - $ 500 (50%) = 1500 $ P.S: The example above was given with the constant initial value of the deposit of $ 1000, even after the loss of 50% of the deposit, the risk was taken from the original deposit for a clear simple example. But you must admit that it is almost impossible to make 50 bad transactions in a row. Risk Management is a risk of loss that you are ready to incur in every deal. The main rule that you should remember is the risk of no more than 1% of the deposit is not a deal. Many people think that if the deposit is $ 100, then you can go as it hit, this is not enough, but when there will be a lot of money, then of course I will not do that. But it doesn’t matter how small you have a deposit, because the more it will be, the less you will put the risk of a transaction of 0.2-0.5%. For example: You have $ 1000 - this is 100% of the deposit, your risk to the transaction should be no more than 1%, it is $ 10. How to count it correctly? Many simply enter all the money in the deal and close when they have $ 10, this is categorically not correct !!! Before you go into the coin, you need to set a stop-loss (the price of which your transaction will be closed). So before entering the deal, we must first calculate how much we can buy coins in order to lose only $ 10 when our foot is reached. Take ETH ($ 1200/1TH) Deposit: $ 1000 Stop: $ 1100 (when the coin reaches this price, our deal will be closed) Risk: 1% ($ 10) Now you need to calculate how many coins we can buy: Risk 1% / (price ETH is the price of the foot) = the number of coins that we can buy. 10 $ / ($ 1,1100 $) = 0.1 coin. And only now we understand how much we can go from the deposit with you: 0.1 coin * 1200 price ETH = 120 $ (this is 12% of the deposit). Bottom line: 1. Pre-Reminance of what to go into the transaction, select where the stop-loss will be (it should not be put at your risk, but where it will not be reached) 2. Now we think how much we can buy coins, so that when reaching the foot we lose only 1% of the deposit. 3. We make our stop-loss 4. We get into the deal Thanks to these rules, to lose your deposit, you need to make 100 unsuccessful transactions in a row. Money Management (not to be confused with the market maker) - the correct distribution of personal finances. It is worth starting with your general finances, do not allocate more for trading than you are willing to lose, make a list divided into 2 columns (income / expense). This way you will be able to understand how much money you have left that you can use beyond basic expenses. Of the remaining amount, it is worth investing no more than 50%, because at any time you can lose all the money. Let's say you have allocated an amount of $10,000 for investment. There is a huge amount of earnings in the market - spot, futures, farming, sales, etc... 90% of people stop at futures trading, while they believe that their capital is simply not enough for other things. Then you must understand that: -20% of your deposit for futures trading will be enough (allows you to open 10 trades). -20% should be left in USD (any stable you are comfortable with) this is an insurance amount that will definitely come in handy for you. -50% of the deposit is worth spending on portfolio investment without shoulders and other fuss. -10% of the deposit is left for participation in sales and auctions, the risk is not more than 5% for 1 project, because you can either get X or lose all the money (there is an opportunity to participate 2 times) So we distributed your deposit, although initially it seemed to you that it was not enough and were going to trade only futures. At the same time, on futures, you take the risk from the total deposit, and if you suddenly get 20 stops in a row, then you will still have the same 20% in usd (you can also use the stable if you want to open additional positions). Invest correctly and don't lose your mind, because it doesn't matter if you have $100 or $10,000, if you treat small amounts negligently, then nothing will change with large ones. Let's talk about the floating variable of your deposit: You have 10000$ - 100% -If you lost 3%, take the risk of the original amount, or of the remaining? -You need to take the risk from the initial amount, set yourself boundaries, for example: We lost 20%, now we consider the risk of 1% of the balance 8000$ = 80$ Set boundaries for yourself, not to change risk. If you have come to the negative side, you need to take a break and rethink your trading, what are you doing wrong and losing money. The same system works in the opposite direction, if you have earned 20%, you can switch to risk from the new amount of $12,000, 1%=$120 All your trades must be calculated in %, not in $ In fact, all these numbers should be individual, because many people face a psychological barrier when the amount of risk in $ starts to increase, so you can reduce your risk to 0.5%. Hope you enjoyed the content I created, You can support with your likes and comments this idea so more people can watch! ✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes. * Look at my ideas about interesting altcoins in the related section down below ↓ * For more ideas please hit "Like" and "Follow"!
Education
by Crypto4light
When to up your share size?Many traders have 2 or more trade set ups. It is important to know the following: 1)The risk of your trade must be in accordance with the winning percentage of the trade set up. 1)Your share size should increase or decrease in accordance with the winning percentage of the trade set up. * Share size increase must be in accordance to you account size (account management) These concepts are what separates really good traders from average traders.
BEducation
by UnknownUnicorn37963351
3