Risk management

[gerryg]

Hi

Hope we are all well and heading in the right direction. What are your thoughts to risk management? Do you always stick to a percentage risk or a money value

ie small account £1 a point etc

Regards

Reduce spreads, let your profits run and cut your losses short.
I calculate the size of a bet so to enable me withstanding 10 losing trades in a row.

 

[FxTim]

If anyone is serious to make trading as a carrier i ll say never use more then 1:50 leverage which is very good and with following the Trend. is a good idea of rightly managing the risk.

 

[SmartGeek]

Risk management is one of the most important aspects of the Forex Trading, the other thing you need to learn is the money management.

 

[FxTim]

In Easy Words I'll say your stop loss should not cost you more then %2-%3 on any of your trade.

 

[Signalcalc]

We are supposed to be talking managerment here, jeez you lot know nothing and spout utter tosh!

 

[FxTim]

They best way in my View is to never risk your Capital more then %2 at a time.

 

[SmartGeek]

In Forex Trading, risks are equal to rewards. So instead of avoiding the risks, we need to manage them in such a way that it rewards us and for that we need to have lots and lots of practice of Forex Trading.

 

[Shaari]

my rissk management is it setting stop loss in 10 pips and take profit in 20 ! or something like this, yeah (5 vs 10... 15 vs 25...)

 

[tomorton]

my rissk management is it setting stop loss in 10 pips and take profit in 20 ! or something like this, yeah (5 vs 10... 15 vs 25...)

In order to see whether this might be possibly the wrong strategy, try reversing the objective. So, instead of controlling your risk, keeping it as low as possible while minimising your exposure to the market's unexpected behaviour, think how you would control your gains, keeping them as low as possible while minimising your exposure to the market. Doesn't it look the same? So how can the same strategy work for opposite objectives?

 

[Shaari]

In order to see whether this might be possibly the wrong strategy, try reversing the objective. So, instead of controlling your risk, keeping it as low as possible while minimising your exposure to the market's unexpected behaviour, think how you would control your gains, keeping them as low as possible while minimising your exposure to the market. Doesn't it look the same? So how can the same strategy work for opposite objectives?

I haven't got your thought , can you please explain what do you mean by 'controlling your gains'? Is it not important to measure risks at all?
But if I wouldn't use stoplosses, I'd already lose all my money that I have

 

[tomorton]

I haven't got your thought , can you please explain what do you mean by 'controlling your gains'? Is it not important to measure risks at all?
But if I wouldn't use stoplosses, I'd already lose all my money that I have

But look at it this way. R:r of 1:2 is ambitious for short-term trades. By using very tight stops you make it very likely they will be hit. It is twice as easy for price to hit a stop 10pts away as for it to hit a TP 20pts away. And don’t forget the spread. If mid-price is 1000 and there is a 2pt spread, you will enter long at 1001 and your stop will need to be at 991. On a 2pt spread, 991 will be triggered after only an 8pt price fall to mid-price 992. On the other side, for your 1001 long to make a 20pt profit you need price to rise to mid-price 1022 so you can exit for 1021. This makes your targeted risk:reward ratio actually an even more ambitious 8:22, nearer 1:3 than 1:2, and effectively an 8pt stop is very easy for price to take out.

If your entry is based on TA, let’s suppose you rank your entries and this one scores 70% for quality of signal. Pretty good. But when you exit at +20pts maybe the TA is now +75% or +80% or +100%. Makes no sense to exit a position that shows great TA in your favour.

 

[Shaari]

But look at it this way. R:r of 1:2 is ambitious for short-term trades. By using very tight stops you make it very likely they will be hit. It is twice as easy for price to hit a stop 10pts away as for it to hit a TP 20pts away. And don’t forget the spread. If mid-price is 1000 and there is a 2pt spread, you will enter long at 1001 and your stop will need to be at 991. On a 2pt spread, 991 will be triggered after only an 8pt price fall to mid-price 992. On the other side, for your 1001 long to make a 20pt profit you need price to rise to mid-price 1022 so you can exit for 1021. This makes your targeted risk:reward ratio actually an even more ambitious 8:22, nearer 1:3 than 1:2, and effectively an 8pt stop is very easy for price to take out.

If your entry is based on TA, let’s suppose you rank your entries and this one scores 70% for quality of signal. Pretty good. But when you exit at +20pts maybe the TA is now +75% or +80% or +100%. Makes no sense to exit a position that shows great TA in your favour.

I think that i get it now! Thank you very much!