Risk Management

Risk management is the management of risk inherent in trading by identifying these risks, assessing them and knowing how to control them. You can't control how much you may profit on each trade, but you can control how much you may lose. Poor risk management is one of the top reasons traders fail. Good risk management is key to capital preservation and involves thinking about how much capital to employ, how much to risk on each trade, how many trades to make daily, weekly and monthly, what stop levels to use for each type of set-up, what reward / risk requirements to enforce, how to employ money management, how to use a balanced portfolio, how to deal with correlations between open trades, what loss limits to set daily, weekly and monthly, how to calculate the overall expectancy of your trading strategy and how to avoid the risk of ruin.

There is a variety of potential risks to take into account. Managing your risk exposure, by knowing what to do and what not to do, helps to prevent deep drawdowns or losing your trading capital.
Tradewonk Tradewonk TOP GBPUSD, D,
GBPUSD: Maximum Drawdown
1527 13 135
GBPUSD, D
Maximum Drawdown

Drawdowns on your account are part of trading but if you establish a trading plan then it will enable you to survive these losses and not wipe out your account.

Kishore Kishore PRO EURUSD, D,
EURUSD: WHY TRADERS LOSE IN FINANCIAL MARKETS
1014 14 64
EURUSD, D
WHY TRADERS LOSE IN FINANCIAL MARKETS

Why Traders Lose In The Financial Market. Three Important Things To Know Before Trading You may be one of the traders out there, Who has lost plenty of dollars in the financial markets. So in today’s lesson we are going to check the most common trading mistakes a trader does when he starts trading. Knowledge: So the first important accept in losing in the ...

Tradewonk Tradewonk TOP AUDUSD, D,
AUDUSD: 6 Tips That Will Help You Deal With Losses Like A Pro Trader
719 7 81
AUDUSD, D
6 Tips That Will Help You Deal With Losses Like A Pro Trader

You probably know that you can’t win all your trades. But understanding that a winrate of 100% isn’t achievable and knowing how to effectively deal with losses when they occur are two very different things. A baseball player who strikes 30% is considered world class, a basketball player who scores 45% is one of the greatest of all time and the best soccer player ...

LewisGlasgow LewisGlasgow TOP GBPJPY, 60,
GBPJPY: Three Reasons Why Most Traders Fail
1153 1 85
GBPJPY, 60
Three Reasons Why Most Traders Fail

Three Reasons Why Most Traders Fail Hello traders, I'm back with another educational post after receiving a lot of positive feedback. Today I'm going to break down three reasons why most traders fail! Traders Fail?! Yes most do, it is believed over 90% of new traders fail (this is an ongoing debate) but why is that? I personally believe it comes down to ...

Tradewonk Tradewonk TOP AUDUSD, 60,
AUDUSD: What You Can't Control vs. What You Can Control
1028 10 104
AUDUSD, 60
What You Can't Control vs. What You Can Control

You can't control price and the outcome a trade, but the factors that you can control outweight everything and enable you to trade with an edge.

LewisGlasgow LewisGlasgow TOP GBPUSD, 60,
GBPUSD: The Power of Compound Interest
942 18 65
GBPUSD, 60
The Power of Compound Interest

“Compound interest is the eighth wonder of the world. He who understands it, earns it... He who doesn’t... Pays it”. The idea of compound interest is simple, use your profit to make more profit instead of spending it... You can do this whilst making small regular withdrawals! BUT Too many traders try to get-rich-quick and in turn blow their trading account. ...

JasperForex JasperForex PRO EURUSD, 30,
EURUSD: Expectancy: How Profitable is your Trading Strategy?
4058 31 37
EURUSD, 30
Expectancy: How Profitable is your Trading Strategy?

As we all know, when we open a trade, there is no guarantee it will be a winner. Given the win rate of a certain trading strategy, there is a random distribution between wins and losses. We trade to make money over a larger number of trades, not to win every individual trade, which would simply be unrealistic. That is why it’s important to be confident when we ...

avidtrader89 avidtrader89 EURCAD, 60,
EURCAD: "Money is made by SITTING, not TRADING" - Jesse Livermore
250 9 22
EURCAD, 60
"Money is made by SITTING, not TRADING" - Jesse Livermore

One of the major reasons why traders lose money is because they ride out their losses and close profitable trades too early. While being patient can help us to achieve our maximum profit potential, being patient on the wrong side of a trade can be costly. This is a great insight into why we are naturally predisposed to riding out losses and not quitting while we ...

LewisGlasgow LewisGlasgow TOP GBPUSD, 60,
GBPUSD: A Simple Lesson in Risk Management
862 14 71
GBPUSD, 60
A Simple Lesson in Risk Management

Utilising a Risk to Reward Ratio How many of you obsess over an 80% profitability rate? You may feel the need to be right all the time and cannot accept a large amount of losing trades. OR You may think in order to become a profitable trader you need to win more than you lose. Well it's time to put that aside. You do not need to have a high profit/loss ratio ...

BenchTeam BenchTeam XBTEUR, 240, Long ,
XBTEUR: Bitcoin / Euro - risk management #1
178 0 2
XBTEUR, 240 Long
Bitcoin / Euro - risk management #1

Hi, This is just a brief description of how I manage my trades. It's important to juggle a few factors in these sort of cases. Firstly, it's best not to mother a trade to much. You need to give it room to breath and keep your stop in a place that isn't going to kick you out to early. If the market is telling you something is potentially wrong, you need to be ...

dravya dravya SPY, 60,
SPY: Educational Series - Part 2
40 0 4
SPY, 60
Educational Series - Part 2

---------- Continued from Educational Series - Part 1 (link below) ; ---------- 3. Expectancy : So, now we have got our risk reward ratio and winrate. We move on to calculate the expectancy of our trading strategy. The formula is, Expectancy = (Probability of Win * Average Win) – (Probability of Loss * Average Loss) So, in our scenario, where, Risk Reward ...

dravya dravya SPY, 60,
SPY: Educational Series - Part 1
39 0 3
SPY, 60
Educational Series - Part 1

NOTE : this post is intended for novice or intermediate traders, professional traders can skip it or read it to refresh what they already know. For the benefit of other traders, I am starting an educational series where i will be covering lots of topics related to trading which everyone should abide by. It will be in simple language and easy explanation so that ...

CalebDismuke CalebDismuke PRO USDCAD, 60,
USDCAD: (USD/CAD)Trading Mistake. Taking profits too early
31 0 2
USDCAD, 60
(USD/CAD)Trading Mistake. Taking profits too early

Taking profits early was a hard lesson I had to learn. I occasionally still do it. See chart For me, the key to LONG-TERM success in this business is not your win/loss rate, but the magnitude of your wins vs your losses. My biggest mistakes have all come from taking profits early, not from taking small losses.

EverythingForex EverythingForex PRO USDJPY, 60,
USDJPY: USDJPY: Anatomy Of Losing Trade - Learning From A Stop
1001 10 30
USDJPY, 60
USDJPY: Anatomy Of Losing Trade - Learning From A Stop

I just posted an updated analysis on USDJPY where I talked about learning from getting stopped out. Now I know it may seem like I NEVER lose but in reality, I lose many trades! But I ALWAYS make much more than I lose because of PROPER stop placement and PROPER money management! If you incorporate and utilize these 2 things PROPERLY and stick to it, it will go a ...

YongLiang YongLiang SPY, D,
SPY: Top 5 Risk Management Rules
117 0 7
SPY, D
Top 5 Risk Management Rules

Top 5 Risk Management Rules: 1. Only Trade with Risk Capital -Risk Capital is the amount of money you are willing to lose and do not include your living capital into your trading account! 2. 2% Risk Management -The 2% Rule prohibits you from risking more than 2% of your account equity on each trade you are entering. 3. 6% Risk Management -The 6% Rule prohibits ...

FedroChristian FedroChristian EURGBP, 60, Long ,
EURGBP: AHEAD OF FOMC TRADE + CURRENCY CORRELATION EXPLANATION
38 0 1
EURGBP, 60 Long
AHEAD OF FOMC TRADE + CURRENCY CORRELATION EXPLANATION

Hi traders, I recently checked my long trade at EUR/GBP and got an interesting idea. I wanted to share with you not only about the mechanics & reason behind my trade but also about the currency correlation between USD, EUR & GBP that can some-how works in my favor. (Assuming we see some "Weakness" in USD when Market reacted to the Fed statements). The Trade : ...

ULTA: ULTA due for a correction
41 0 5
ULTA, W
ULTA due for a correction

ULTA is clearly overbought at this point in time. Now is certainly not the time to go long on this equity. Key Points: 1. Overly bullish sentiment 2. RSI on weekly is around 85 - probably the highest in it's history. 3. RSI on daily has been hovering dangerously around 80 for quite some time. 4. There is no clear RSI divergence from price at this time. 5. ...

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