Many traders asking me always how many pips I can make weekly, monthly or what is my success rate. It's all wrong questions. True is that no one is able to be profitable in 90% trades (ok only scammers they can make even 99% but if you ask for live results they will not show you anything, maybe screenshot from phone)
Those traders who can make 60% success rate and add the risk correct risk management they are trading superstars and very profitable.
So what is the correct risk management?
Using the small position compared to the trading account? No its definitely not it. Using small position, will protect you from burning account but you will not make any profit.
Let me show you what I mean by correct risk management on 2 scenarios and 5 trades examples on the 10K account.
Per my view the correct risk management means mainly pre-calculate the position size for each trade and thinking in % and as well adding same value to the each trade.
First of all It will safe my nerves when trading and protect me from emotional trading like closing the position early in profit or the worst case closing position because of fear of unknown loss.
I understand that here are some traders which always use same distance in pips for stop loss and same profit target. Everything is possible and if it works for you than perfect and I suggest continue doing it.
But if we want to protect our Stop limits from being stop hunted we must use the market structure to hide SL behind swings or when we targeting we always looking to target some structure level.
So this will give different RISK X REWARD ratios for each trade. Yes it would be perfect to have always trade minimum 1:3, but reality is not as its in the books.
So we have various risk rewards as on the 5 trades examples which I picked here with different risk to rewards, pips distances etc..
Now I want show you what difference it will makes when we have just bad period and how the risk management can safe us.
So lets assume that from this 5 trades will be 4 losers and 1 winner. Same trades
1) using always same lot 2)with calculated risk
EXAMPLE 1 - USING ALWAYS SAME POSITION SIZE 10K ACCOUNT - this will not work because every trade will have different risk and losses will not be covered. - psychological affect will destroy you - total result after is -273 pips - 2.7% and - $273
Now lets look at the tottaly same trades with pre calculated risk for each trade 1.5%
EXAMPLE 2 - CALCULATED RISK FOR EACH TRADET - as we can see we are using for each trade different lot size so we risk 1.5% for each trade. - if you loosing 4 trades in row and you know your loss risk in advance psychologically you will be ok. - we again ended -273 pips BUT +$337 IN MONEY AND + 3.37% PROFIT
So we have lost 4 trades and 1 winner. Overall we are - 273 pips Success rate? Only 20%
But still in profit when we using correct risk management. No imagine if your success rate is more than 50% with this risk management.
I can guarantee you. That you will be very profitable. I'm not only saying that but I can prove it as well with the live results.
Visit my 1 year Live account results history connected to the 3rd party verification website - FX Blue. You will see my success rate is only 49.6%, but I was able to make 1000% return in 12 months with 21.4% peak draw down. So I took 5k deposit to the 55K.
Link is in the signature.
Risk Management is ALL !!
Let me know what you think and share your experiences here to.
How did you get those values? For example 3rd case from left, 0.15LOT = 15000pips. Now, 1.5% of 15000 is 225 pips of risk, not 100. Could you more deeply explain how you calculated it?
Dave-FX-Hunter
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@kris82wt,We spoke about the 10K account as mentioned on the picture. So if in the 3rd case from left our risk is 100 pips to hide the stop loss behind the market structure.We will must calculate the lot size to get risk 1,5 % from our 10K account which is 0.15 lot.
In the fourth case from left where we will must use stop loss distance 208 pips to hide the stop loss behind market structure. If in this case we want to use again risk only 1,5% per trade we should use 0.7 lots to get this risk.
Main idea of this post is to explain that we must always adjust our position size to risk for all same trade same $ from our accounts, because the market structure is not always same.
Hope this it explains well.
kris82wt
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@DaweFXHunter, thank you for your answer. I was assuming you play with stop loss value to get 1.5% risk instead of volume size
davewantsmoore
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I am slowly learning that this idea is the most important in trading. Thankyou Dave.
UnknownUnicorn2760874
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Awesome idea man! Really good, risk management is our all :)
troyjpentecost
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I have re read this a few times and every time i finish it i feel i leave with something new learnt, or a new idea to be cautious of. Thank you for the quality of Content.
HilgardMuller
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I can confirm that DaveFXHunter have been the best teacher I ever had and he completely turned my trading around to crazy profits, thanks again Dave, as I have told you before, I am a client for life
Dave-FX-Hunter
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@HilgardMuller, Thanks Hilgard, this week we had really good.
DarkH_orse
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Thankyou for sharing this knowledge.
On Fxblue Results - i note you are making large gains on the Ger30 with a trade duration of 10 which seems to be set - mainly short , What is the angle here ?
Dave-FX-Hunter
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@DarkH_orse, What you mean by angle? I dont know why but I always fell better in shorting :D