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Riskreward

How much leverage should I be using?Understanding how to trade forex requires detailed knowledge about economies, political situations, all the individual countries, global macroeconomics, the impact of volatility, it goes on and on. But the reality of the situation is this isn't what makes most new traders fail. What makes most traders fail isn't the lack of knowledge or understanding of what it is they're actually trading. It's the lack of knowledge and understanding on leverage. As most of us would have heard, there is very obvious statistic out there that majority of retail traders fail. Now, most people will see this as a lack of competence and just purely not willing to put in the effort to be successful. But a lot of the time it is people not understanding the risk their undertaking and what it is they're actually doing with their money when they enter the market. It really highlights this when traders come to a firm like ours, and question leverage or they have so many questions about leverage that even though they've been trading for three to four years, they still don't fully understand the actual risks that are at hand when they are opening certain positions that they really can't afford to open. Today I wanted to jump into leverage. Let's really dive into depth what it is, why we have it, how we can use it. Then, finally touch on what is the right amount of leverage for you as a trader. So you can be exponential in maximizing your profits, but also ensuring that you're not damaging yourself long term. LEVERAGE RISK Firstly, I think it's important for us to have a look into leverage. Leverage is the process in which an investor or trader borrows capital in order to invest or purchase something. Typically we borrow capital from a broker and we buy into positions with money that we didn't have in order to be able to gain more profit from those positions. Most traders are blindsided and constantly think the more money I have, the more profit I can make, which is true, but they fail to recognize that the more risk it carries. Carrying higher leverage is an exponential increase in risk. Most brokers out there will probably offer you something like 50:1, 100:1 or even 500:1 leverage. This giving you a buying power of 50, 100 or even 500 times whatever the amount of money you have in your account. Which means a trader with just $100 in a brokerage account could open a position with $50,000 in the market. Now, while that may sound advertising, believe me, that's a trap and we're going to chat about that today. HIGH LEVERAGE EXAMPLE So let's dive into an example. Let's imagine we have a trader who has a $10,000 account. They decide to use 100:1 leverage, which now means with that $10,000 cash, they can trade up to $1,000,000 in the forex market. Let's assume that the trader opened a position with the full available capital which would relate to 10 lots, and they opened the position on a currency with the USD being the quote currency. That means that each PIP movement is equal to $100. So for a simple equation, if they were to enter a trade and that trade went against them by 50 pips, they would have lost 50% of their account because that 50 pips would have been equal to $5000. So in one wrong trade they lost 50% of their account. So many people in this industry is so quick to look at what the realized gains could be, but they rather tend to ignore the actual risks that come with that. If you don't have sufficient evidence that your investment strategy is going to provide consistent and stable gains long term, do not look to trade with higher leverage, as you will be gambling and it is extremely risky. LOW LEVERAGE EXAMPLE Now let's use the same example, but in a lower leverage situation. The trader has $10,000 cash only this time he is trading on an account with 5:1 leverage, resulting in a buying power of $50,000. This means on a pair with the US dollar as the base currency that you can open a maximum size of 0.5 lots. Let's go ahead and take the exact same trade, only this time with a 0.5 lots, each pip is equal to $5. Should the investment or trade fall the same 50 pips this time the trader will only lose $250, which is a mere 2.5%. Same trade, different leverage, one lost 50% the other lost 2.5%. It is a common trick out there that traders feel they require more leverage to really make money in the market. It's not true. Yes, it can help you get more profits from those smaller moves. Yes, it is really beneficial if you have a proven strategy. If you are still coming to grips with trading or you're fairly new and you haven't achieved consistency and profitability yet, focus on lower leverage. What it will actually do is make you focus on long term goals. Focus on the process this giving you more sustainability in the market and therefore more maturity. CHOOSE THE RIGHT LEVERAGE Choosing the right leverage is a very important step in Forex trading. You can be tapered in by fancy numbers and big brokers trying to get you in, Or, you can realistically dive into what it is you actually need and what's going to benefit you more in the future. There's no right answer to how much leverage you need each strategy in each individual require different things, but what I will do is share some tips and some knowledge on how to choose the right one that benefits you. 1. Always try and maintain the lowest leverage you possibly can for your strategy. If you manage to pull it right the way into where you can only just open the positions on the risk you have allowed yourself, and you can't open more than, lets say three positions, what you actually do is limit yourself to focus on only the good positions. You've prevented over trading from occurring and you can really focus on your risk management. 2. When you open positions or you talk about opening positions instead of going to people saying, "yes, I opened 0.35 lots." Use the actual dollar value when you open a 0.35 lot position. Instead, say "I opened a $35,000 position." Talking in that language that you have placed your bets with $100,000 or $1,000,000 will make you realize how much risk you're actually exposing yourself to and the capacity of what it is you are trading. 3. Limit your overall risk, at absolute Max, I risk 0.25%. This allows me to go into large drawdowns and it not be an issue. I can still manage it accordingly in it actually keeps me nice and calm and focused on the analysis rather than the running profit and loss. The bottom line is selecting the right Forex leverage depends on the traders experienced risk tolerance and comfort when operating in the market. You want to ensure that it's not out there to harm you, but rather it's there to help. You do not want be trying to get really high leverage so you can make large profits, when you know realistically, there is no evidence to prove that you will make those high profits. Start small, gain consistency, gain exposure and gain experience, and then you can start looking to expand your equity and buying power.
FOREXCOM:XAUUSDEducation
by the5erstrading
40
How the higher time frames help you to avoid unnecessary losses Hello everyone: Today I want to discuss the importance of higher time frame analysis. Doesn't matter what type of trading strategy, method or style you use, the higher time frame often will help us to strengthen our bias overall and give us a good perspective of the possible direction for the price to go. In addition, it helps traders to avoid unnecessary losses and mediocre entries that will eat up your profits. More often I hear traders will execute trades on the lower time frames, and not factor the overall higher time frame bias and perspective. Although entering on the smaller time frame can potentially give you more Risk:Reward, it's often more risky and trades can easily reverse, then hit the stop loss. This often creates stress, negativity, and revenge trading psychology for traders which ended up blowing accounts. I want to give a few examples of higher time frame analysis, how they can help traders to avoid “traps” on the lower time frames, avoid unnecessary losses, and keep the emotion at bay to trade another day. When having a bullish bias on the HTFs, its good risk management to not consider any short term, bearish sell setups. These sell setups may form on the LTFs, but they can easily not continue to your desired target, and reverse up before you have time to react. In addition, traders hate to see profit come and go. So if a trader has a short position running in some profit, but decides to hold onto the trade, and once the position reverses, traders don't want to exit, and then end up holding a losing position to its SL. Examples: AUDUSD: HTF: Overall bias and perspective in bullish LTF: Many LTF bearish setups/development, but due to going against the HTF, they ended up with losses NZDUSD: HTF: Overall bias and perspective in bullish LTF: Many LTF bearish setups/development, but due to going against the HTF, they ended up with losses AUDCHF: HTF: Overall bias and perspective in bullish LTF: LTF bearish setups/development, but due to going against the HTF, ended up with loss NZDCHF: HTF: Overall bias and perspective in bullish LTF: LTF bearish setups/development, but due to going against the HTF, ended up with loss NZDCAD: HTF: Overall bias and perspective in bullish LTF: LTF bearish setups/development, but due to going against the HTF, ended up with loss SILVER: HTF: Overall bias and perspective in bullish LTF: LTF bearish setups/development, but due to going against the HTF, ended up with loss
Education
by jojofang0901
19
Risk/Reward Tutorial - The Holy GrailThe traders who learn to view and think about trade setups in terms of risk/reward are the ones who end up making consistent (albeit massive) amounts of money. My personal strategy looks something like this: Using the 4-minute chart as the earth rotates 1 degree every 4 minutes. 

 𓃭 0.50% stop-loss measurement 𓃭 1/2 profits at 1.30% level and move stop to break even. 𓃭 2/2 profits at 1.50% :: (or 1.70%) 𓃭 Wait to enter trade at the previous 2nd candle base break up/down and skip trades that are in consolidation where the direction is not 100% clear. Keep in mind that my signals are so precise (indicating near exact future pivots) that I am able to use such a tight stop-loss, but this wont necessary work for the average trader. This video is merely meant to serve as an example of how to work out ratios for yourself. Knowing when not to take a trade is just as important as when to take a trade. Don't enter a trade if you are not confident, as it will only damage your equanimity. Don't let greed or fear destroy a good thing. Those emotions + impatience and lack of self-discipline are obstacles that prevent 97% of novice traders from ever succeeding in maintaining a long-term professional career. You should be operating as any casino or business would, do not gamble with your business. At the same time, allow yourself to make endless mistakes with ease and grace, knowing that if you want to succeed baldy enough and you never give up, you will find a way to realize your dreams! Mistakes are a right of passages. Excruciating lows and euphoric highs are what everyone experiences on the road to success. The 97% will give up along the way or never even attempt to begin with.
BYBIT:ETHUSD.P
by EsotericTrading
2
Do you have a Reward to Risk ratioIn the world of trading, do you know what a Rw/Rs (Reward to Risk) ratio is? if you dont this article will be beyond your understanding. I suggest you read up on Reward to Risk ratio & come back to read this. If you do know what a Rw/Rs ratio & assume most of you do, we can continue our merry trade discussion ;D My Rw/Rs ratio for Swing trades that i take on a Weekly (W) chart is factor of 4 to 6, am happy to see more. with my Day trading strategy; am a little more aggressive & will settle for a Rw/Rs factor of 3-4 to take on a day trade. Once a while, a trade opportunity arises that offer such a large room for Reward to run, as in this (W) chart of WMT WalMart Corp. if the trades goes my way, look at this room for profit to run, with no resistance of supplyzone in sight this can go up.....sweet mama, she got my attention. First; (Disclaimer) I will never take a trade solely based on a sweet Rw/Rs the odds are not in my favour. Back to the trade. So i have a sweet Rw/Rs ratio what else is going on? Price is crashing into a DZ from the (M) & this DZ happens to be the HL of the month (M) uptrend. This is good, The week (W) price chart is into the long-term chart DZ (Demand zone). This qualifies only if the (M) is still in a technically defined in uptrend. This is a Classic trade set-up I love. Like a Snipper I set my LNG (long) entry at 117 level slightly above the lower band of the DZ, my entry was so low that my risk was less than a dollar before my STP triggers. I took the Long position, the market rallied & so did WMT, & I closed 1/2 my position once price reached 128, I took a good 10 Rw (Reward) pressure if off. already the trade made its money. & I let the 1/2 of the position run. Lets see how it goes when the market is open on Monday. This was a swing trade using the (W) chart to identify the setup. Long-term would be the (M) chart & I used the (D) daily chart to enter & set my STP.
NYSE:WMTLong
by greatful-me
Risk management in tradingWhen trading on the stock exchange, you need to know at least the basics of risk management, but it is better to understand it professionally, because the main attribute of any transactions made in the financial markets is risk. Without competent, professional management, without risk management, it is impossible to stay in such markets for a long time. To be a successful trader, you must learn to assess risks, balance and reduce them. Only in this case, the capital will not only be saved, but also increased. Fundamentals of risk management To properly manage capital, you need to know about the following principles: 1. You should not invest even in the most tempting project more than half of the total capital. Among financial experts, this principle is also called "don't put your eggs in one basket" or "diversification." That is, in order to successfully continue your activities in the financial market, it is best not to invest all your funds in only one undertaking. More than half of the money must be left for other projects and for the continuation of their work 2. Invest in one position no more than 10-15% of the total amount of funds you have. Another advice from the category of diversification, which insures against ruin. He warns that one cannot invest a lot of one's funds at once, it is better to distribute them correctly and limit one's risks, and make the profit more stable. 3. The rate of risk in the transaction must not exceed 5% of the total amount of funds you have. If you follow this principle, then the loss ratio of any trader will be less than 5% of the total capital. Depending on which market and which strategy is used to trade, the percentage of risk can be reduced to 1%. 4. There must be a balance between diversification and concentration. While diversification is one of the most reliable risk management techniques for reducing risk, even its application must be measured. It is necessary to balance the diversification and concentration of funds. There is no need to turn your portfolio into a "stuffing" of investment instruments, you will only need to open positions in 5-7 groups of instruments. Before compiling a portfolio, it is necessary to determine the correlation between trading instruments. It may be zero, but it is preferred that it be negative. In this case, the future fall of one group of instruments will be compensated by the growth of other groups. 5. Place stop orders. In order to avoid large losses if the price change is not in your favor, it is best to take care in advance and set Stop Loss. It makes the price fixed, which will allow the trader to close the position at this price. The way the Stop Loss will be set is influenced by market analysis, as well as the personal readiness and ability of the trader to make dangerous, risky, but profitable transactions. When placing a Stop Loss, you need to correctly assess not only the totality of technical factors, but also the characteristics of personal qualities, in particular, your ability to take risks. 6. Determine the rate of return. For any operation in the market, it is necessary to determine what the ratio of profit and loss will be. Such a forecast is necessary so that, in the event of undesirable phenomena on the market, the risks are balanced. In the financial world, a good ratio is 3:1. The simplest example: if a trader risks $100, then his profit from the transaction must be at least $300 (300:100 is the same as 3:1). If for some reason such a ratio cannot be achieved, then it is better to refuse the deal.
BITSTAMP:BTCUSDEducation
by Crypto4light
2
Risk Management ‼️‼ Survival rules in trading for newbies, if you respect those rules i can make a bet you wound't lose your account as the majority of traders are. ‼ The key word there is IF YOU RESPECT ✅ 1. Always trade with a stop loss ✅ 2. Have a pre-determined risk on each trade no more then 1% ✅ 3. Don't move your stop loss if the price is not going in your favour ✅ 4. Don't add to losing positions, only viceversa. Add to your winning positions ✅ 5. You have to increase your risk only if you are in profit on your account, decrease your risk when you are losing and increase it when you are winning. Hope that was usefull for your trading plan.
Education
by Snick3rSD
Trading the bleeding markets with a winning mindset ;)There's a great struggle going from profit to loss. A burst of a bubble, which in it's essence is hope. But this is false. The odds are, that your profits were on paper, so how does a loss on paper differ from a profit on paper? Truth is - It doesn't. But what it does do is play with your emotion. Our mind has a tendency of expecting the worst once things start rolling in that direction. Take a step back and think about what life threw at you so many times in the past, think about the times you thought things are going to end up the worst but actually didn't. It could be you planned a nice day outside with your partner in the park but it started to rain. But instead of crying about the day wasted and how this is just awful, you ended up cooking together a nice lunch and drinking wine while finding a new great TV show to watch, ending up being one of the best days in a while. Not let's roll back to trading. And let's cut out negative thinking completely just for 3 minutes and look only at the positive. Positive points - 1) Cheap instruments all around to invest in 2) Great practice of mental skills while trading, which truly is the most influential aspect of mastering trading 3) It reminds you the very basics of trading that we lose track of once markets start flying up - Buy low, sell high. 4) Opportunity, opportunity, opportunity - Every time you would have bought into the stock market, over a few year period you would make great returns, same thing goes even for people who bought Bitcoin after the decline of 2018 and pretty much any other pop financial instrument. 5) You're a day trader? Great! Volatility is amazing if you have a strategy which is disciplined and consistent as well as based on risk management. See how bright the light shines at this very moment? Keep it. Be positive. Be hopeful. Be practical. The negative quotes such as - I can lose everything! It's never going to rally back! This is taking too long! I don't have patience for this! This is turning out to be so not fun! I didn't expect to hold this trade this long! How will any of this benefit you in any way? Where's the logic? Where's the gain? Where's the analysis? Where's the market view? Where's the money management? Only look at what is relevant to your success. Block the negative, ignore it completely as much as you can and eventually always. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Thank you so much for reading! I hope you found my idea useful, if you did, please like and follow! It would mean the world to me. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BITSTAMP:BTCUSDEducation
by Exactus
ow to Apply Trailing Stop | PRICE ACTION TRADING 📚 Hey traders, In this post, I will share with you my strategy to apply a trailing stop. Please, note that I am applying a trailing stop only in trend-following trades and only when a trade is opened on a key level. I trade price action patterns, so the following technique will be appropriate primarily for price action traders. Moreover, my entries are strictly on a retest. 1️⃣ Spotting a price action pattern I am always waiting for its neckline breakout. (if we talk about different channels, then by a neckline we mean its trend line) Once I see a candle close below/above the neckline, I set my sell/buy limit order on a retest. Stop loss will strictly lie below the lows of the pattern if we buy and above the highs of the pattern if we sell. 2️⃣ Once we are in a trade, you should measure the pattern's range (distance from its high to its low based on wicks) and then project that range from the entry to the direction of the trade. In the picture, the pattern range and its projection are the underlined blue areas. Once the price reaches the projection of the pattern's range, you should move your stop loss to entry and make your position risk-free. Move stop to breakeven in traders' slang. 3️⃣ Then you should let the market go. 📈If you are holding a long position you should let the market retrace and set a higher low and then a new higher high or AT LEAST an equal high. Once these conditions are met you can trail your stop and set it below the last higher low. 📉If you are holding a short position you should let the market retrace and set a lower high and then a new lower low or AT LEAST an equal low. Once these conditions are met you can trail your stop and set it above the last lower high. Catching a trending market you should trail your stop based on new higher lows / lower highs that the price sets. Occasionally you will catch big winners. How do you apply a trailing stop? ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
BITSTAMP:BTCUSDEducation
by VasilyTrader
5
One Way to Hedge Inflation: REITsOne way to hedge a high inflation rate is to invest in REITs. Dividends can help offset some of your higher costs. This is touted all over at this time, but don't throw darts at random REITs. And to be honest, chances are your small fund manager could probably use your guidance if you're well-educated on the markets. The same due diligence is required for any investment even if you are only investing for the dividends. The share price doesn't matter as much as the company's Income, but good Income for high dividends comes from a strongly managed company, as always. This is important because you'll hold the position for a while. Start with the technical analysis to pick the REITs you'll research further. We do this at TechniTrader by starting with our scans, which look for improvement in the trend and also our large-lot indicator set. Example: NVST came up on TechniTrader scans today because it's attempting a bottom at a previous buy zone which is at the lows of a long-term trading range and it has improving indicators, technical and fundamental. All good there to start more fundamental analysis, but solid risk analysis requires confirmation of that bottom fully developing before taking action. Next, we check the TechniTrader fundamentals, which focus on how strong the institutional holdings AND holders are, the most important financial metrics and more. If all is good there, then we put the stock on a watchlist to wait for the chart patterns to set up for the best entry and risk to profit profile. For all investing and trading, a step-by-step plan for confirming when execution takes place once you've done the work to pick the best opportunities is the difference between the retail crowd and the professionals who make a living in the markets. Happy TechniTrading! Please Like and Follow if you're going, "Right? Why didn't I think of that?!" There's more where that came from at my website.
NYSE:NVSTEducation
by MarthaStokesCMT-TechniTrader
AMD: Any chance of reversing? Let's see.Hello traders and investors! Let’s see how AMD is doing today! First, in the 1h chart, we see a strong bear trend, and there’s nothing indicating it’ll reverse. As long as we keep seeing lower highs/lows, we can’t say it is a buy. However, AMD has a few key points that if broken, it could trigger a reversal. First, we have the 21 ema, working as a resistance for the price. Second, we have the purple trend line, as AMD has been trading below it for nearly a month now. Last, we have the previous resistance at $ 91.35. Only if AMD breaks all these resistances we might say the trend will reverse in the mid-term. If AMD is about to react, the timing couldn’t be better: We just hit the support from July 2021 today (blue line). We see a bullish candlestick today, which is great, and since we are just at this support, the Risk/Reward ratio favors long trades. We are far from the 21 ema, and any reaction in the 1h chart could make it retest the ema again. If we see more confirmation signs in the daily chart, we could say AMD will fill the last gaps, and the $ 118.60 would be our target. The only problem is we have earnings in 6 days. This will increase the volatility, and could help a bullish thesis, sure, but if it backfires, the next support level is at $ 72. For now, I am neutral on AMD, and I see many other stocks that look much more interesting, but if this works out, it could be a great opportunity to trade. Now is the time to watch it closely. I’ll keep you guys updated on this, so remember to follow me to keep in touch with my daily analyses!
NASDAQ:AMD
by Nathan_The_Finance_Hydra
7
Risk to Reward ratio is the QUEEN - Number two reason to tradeWhen i want to take a trade, I look for ODD ENHANCERS, the more odd Enhancers I have the more likely the market will turn in my favour. One of the most important Odd Enhancers is proper Risk to Reward ratio. Rs/Rw means how much am willing to risk if the trade goes against me, divided by how much Reward is trade gives if it is profitable. A properly weighted Rs/Rw ratio yield a factor of 4 to 5. In this trade on QSR traded on the NASDAQ, am risking a little over a dollar for a reward of four dollars & much more if the new formed downtrend continues. now, we got the Rs/Rw ratio out of the way of teachings. why would i Enter this trade. If Risk to Reward is the Queen then identifying the Trend is KING. You must of heard people say, trade the trend, swim with the current not against it & you flow. - first step Identify the Trend on any longer term chart. (there are many techniques for this) - Second step trade the trend corrections on the Short term chart (this is the chart I use to identify my ENTR price & my STP losses) This is it! identify the trend on the bigger picture & look for opportunities to join. In this Trade. according to my Trend identification technique, I observed the Week (W) long term trend to turn into a downtrend after it broke the last LH of the previous week uptrend. now the trend is down. am looking to short. I ENT my SHRT at 59.80 with a tight STP above 61.03 my risk is tolerable when compared to my Reward if the downtrend was to continue. well, it is struggling. my trigger STP was triggered & am out. simple as that. I will take my small loss & walk away holding my head high in respect for my trading plan that does not work all the time but works enough that i can make a living doing this.
NYSE:QSRShort
by greatful-me
Poker Hands Relating To Trading (((FTM APRIL 2022)One major similarity between poker and trading is that they both involve incomplete information. A poker player may have a strong hand, but he or she is still not 100% sure of what cards other opponents hold. The same thing applies to an investor/trader who may predict a good return but may not be 100% of it. So, decisions in poker and trading are often based on incomplete information. Once the market has dealt the hands (provided us traders with information of market behaviour) we can play the hand, stronger the hand the higher the probability of the trade becomes. How much do we want to risk ?? With due diligence, we need to know the EV+ ( Positive Expected Value) and RMultiple expectancy and with this information we can assume a 60-70% chance of making money and now its up to how much we are willing to risk on the trade. Risk Management Position size of £100 with a 10x leverage = £10.00 Risk Per Percentage With a 2/1 RR, the Reward Per 2% = £20.00
BITFINEX:FTMUSD
by LuxTradeVenture