Hello Traders!
First of all, I must tell you that trading is 90% psychology 9% is Method and 1% is your deals/trades that you put.
Discipline is the most important part of psychology and there are some factors that keep your discipline alive and one of them is Risk Management.
The trading method has more importance than RIsk Management and if you are trading from methods that are available on the internet then I will say RIP because the knowledge available on the internet is complete trash because it needs lots of modification before applying on a live account. Learn yourself and work hard, Create your own method with a personal trading style and if you need any help then I am here to help you.
Why do we need Risk Management?
Risk management helps you to deal with uncertainty. If we look at the fact that 90% of the traders lose money then there is no difference between you and 90% of the traders if you completely ignore risk management.
If you have not planned your Risk management yet then here is my model of Risk management.
In my model, I only take 2% of the risk per trade and we will only trade if the trade will provide 1:3 or more Risk: Reward. Good risk-reward is the only key that will keep growing your account.
My average Risk:Reward ratio is 1:4 and my win rate is close to 60%.
Here is an amazing calculation.
Suppose your trading balance is 1000$ so you will trade with 10% of the account which is 100$ and trade with 10x leverage and your stop loss must not be more than 2% means if you lose you will lose only 20$ which is 2% of the trading balance and according to my method our target will give you 1:4 means you will gain 80$ at the target.
If my accuracy is 60% then if we trade 10 trades in a week means
We lost 4 trades and with every trade we lost -20$. So -20$X4 = -80$
We won 6 trades and with every trade, we made 80$ profit. So 80$X6 = 480$
In the end, we will make 480$-80$ = 400$ easily.
That's the power of Risk management also it's a power of a Good trading Method.
Here is another Example
If a method provides 1:3 R:R with 50% accuracy then here is another interesting calculation
If we trade 30 trades in a month means we will lose 15 and will win 15.
Same as above we will trade with 10% of the account which is 100$ and trade with 10x leverage and stop loss is not more than 2% and the target is 6%. (This is an average calculation of your all trades.)
We will lose -20$ per trade and with 15 losses we will lose 20$X15 = 300$
We will gain 60$ per trade and with 15 wins we will gain 60$x15 = 900$
So in the End we will gain 900$-300$ = 600$
Even with a bad win rate, you will definitely keep growing your account.
It doesn't matter if you lose 3-4 consecutive trades. You will definitely make money and will end up in profit.
Also, remember I told you Method is more important than risk management and if you don't have a good method then work on it or follow my trades until you create yours.
Don't forget to hit the like button and follow to stay connected.
First of all, I must tell you that trading is 90% psychology 9% is Method and 1% is your deals/trades that you put.
Discipline is the most important part of psychology and there are some factors that keep your discipline alive and one of them is Risk Management.
The trading method has more importance than RIsk Management and if you are trading from methods that are available on the internet then I will say RIP because the knowledge available on the internet is complete trash because it needs lots of modification before applying on a live account. Learn yourself and work hard, Create your own method with a personal trading style and if you need any help then I am here to help you.
Why do we need Risk Management?
Risk management helps you to deal with uncertainty. If we look at the fact that 90% of the traders lose money then there is no difference between you and 90% of the traders if you completely ignore risk management.
If you have not planned your Risk management yet then here is my model of Risk management.
In my model, I only take 2% of the risk per trade and we will only trade if the trade will provide 1:3 or more Risk: Reward. Good risk-reward is the only key that will keep growing your account.
My average Risk:Reward ratio is 1:4 and my win rate is close to 60%.
Here is an amazing calculation.
Suppose your trading balance is 1000$ so you will trade with 10% of the account which is 100$ and trade with 10x leverage and your stop loss must not be more than 2% means if you lose you will lose only 20$ which is 2% of the trading balance and according to my method our target will give you 1:4 means you will gain 80$ at the target.
If my accuracy is 60% then if we trade 10 trades in a week means
We lost 4 trades and with every trade we lost -20$. So -20$X4 = -80$
We won 6 trades and with every trade, we made 80$ profit. So 80$X6 = 480$
In the end, we will make 480$-80$ = 400$ easily.
That's the power of Risk management also it's a power of a Good trading Method.
Here is another Example
If a method provides 1:3 R:R with 50% accuracy then here is another interesting calculation
If we trade 30 trades in a month means we will lose 15 and will win 15.
Same as above we will trade with 10% of the account which is 100$ and trade with 10x leverage and stop loss is not more than 2% and the target is 6%. (This is an average calculation of your all trades.)
We will lose -20$ per trade and with 15 losses we will lose 20$X15 = 300$
We will gain 60$ per trade and with 15 wins we will gain 60$x15 = 900$
So in the End we will gain 900$-300$ = 600$
Even with a bad win rate, you will definitely keep growing your account.
It doesn't matter if you lose 3-4 consecutive trades. You will definitely make money and will end up in profit.
Also, remember I told you Method is more important than risk management and if you don't have a good method then work on it or follow my trades until you create yours.
Don't forget to hit the like button and follow to stay connected.