When I first start trading, I was very attached to money. I always saw risk as money and target as money, how much money am I risking on this trade. Now at first, things where quite fine. However, my mentor gave me a simple homework to do. He told me to convert the amount of money that I am risking to percentage and then take this trade on a bigger account (which is 10 times bigger than mine) and ask yourself can you afford to take this trade ?
I was shocked so hard, that I was risking like 20% and sometimes 50% of my account.
He told me that most traders keep losing money because they focus on money rather than planning their trades based on Percentage risk and target. I have published a video on my YouTube channel that will explain in more details the concept of percentage and that is why I keep developing trading tools that will help me stay focus and control my emotions
For example, you might afford to risk $300 of your $3,000 account on one single trade (which is 10% of your account), BUT are you willing to take the same trade with the same 10% risk on a $30,000 account (which means you will risk $3,000)?
IMO, if you trade more than 1% -2% of your capital per trade, it’s the fast track to losing the whole account. A 10% trade is gambling, IMO, so no, I wouldn’t dream of sanctioning that.
It depends on confidence if u have big experience and u know what u do u can take big risks but for newbies better to trade with small leverage untill u will not find ur style of trading
Good post. Stop thinking about money and start thinking about percentages.
Recognise that if you make just 6% profit per month and make no withdrawals you will double your account in one year.
Suppose you start with £1,000 in your account and you want an annual income which you can withdraw from your account of £30,000. If you can stick to the same strategy you will achieve this in 5 years.
No, no they don’t and here’s why. The real players are not speculating on the markets with retail brokers using CFD’s. They are the market and they they trade cause their boss says I need $60M EUR get it for me. Then collect a pay check only you and me dream about. And as for this 2% rule, hogwash. Disregard it and all that preach it (at this point looks like all above). Leverage your account to 1:5 and if you don’t have enough to place a bet then that’s just they way it is.
I agree with always viewing trades, profit and losses in percentage terms. It’s a psychological aid which must be reinforced until your unconscious mind accepts it, and which separates money from your thinking process, and it does and will work.
I have doubts, however, that most newbies could make an APR of 72% and consistently run at that rate for 5 years. Realistically, a 3% monthly profit aim would be ideal.
Its true that most new traders (and probably most expert traders) clearly cannot run at 6% profit month after month after month. But this in itself begs the question, why not?
Let’s assume a trader uses a 1% risk level and has a 1.5% TP per trade. If they trade just once per day per month and make just say 20 trades to make it a round number, they would only need to win 11 trades out of the 20 to achieve their 6% target. That’s a win rate of just 55% and a r:r of only 1:1.5. These performance statistics are way below what is recommended for any realistic strategy, they are truly unambitious.
So what is stopping us? Can it be that there really is no tradeable strategy that has a 55% win rate and a 1:1.5 r:r, which performs consistently? Is the Holy Grail not a particular dramatically successful strategy, but actually just a strategy that doesn’t fail?
Got to love math’s. Math’s you can make say anything you want. Remember the old high school challenge. Using only four, 4’s and some select operations to make every number from 0 to 100. Thats what we have here and generally generated by people whom don’t trade.
Problem here is math’s doesn’t take in the house edge of cost of trade. Whether it’s spread or commission, a simple R:R day trade strategy like what is being suggested here incurs cost. From my experience cost could run up as high as 10-12%. SO, his 1.5%TP target now becomes 1.65%, one extra stop is trigger, he has only a 50% win rate and his account is now down 6%.
Sorry chief, thats just the house advantage and reality of the game to those of us that trade. Even from my history I know that!
'course, this is a theoretical strategy, but I’m assuming the 1% risk and the 1.5% win per trade, are both net, after costs from spread etc… And the long-run win rate always makes 55%.
Now the only parameter here that is ambitious is consistency. Whereas r:r is 1:1.5, win rate is 55%, and these are not excessive according to the literature and the beliefs of apparently successful traders and trainers. In fact, many will say they are too low to be worth considering.
But the consistency of this theoretical strategy is ambitious - it is a perfect 100%. THAT seems to be the hard part. But why?
i for 1,trade only in % risk and gain. as for the 1to5 RR, that s very doable, but not every trade is gonna run to R5, R10 or whatever, so managing the trade corectly imho should be imperative, based on what the chart tells u. the trade u just entered looks great, everything lines up perfectly, u are in small profit but all of a sudden u hit buyers(assuming ur short). the hands on risk and aligning the posizion size of the initial trade with what the chart is currently telling u is almost very important imo again. u entered, was looking great, but now it ran into trouble, so scale down the risk to match the current probability of ur trade working out etc. ofc there s a lot of practice and failure that goes into this to get to that point, but if u really wanna make trading work for u and not against u, the management of a trade is crucial. most can find themselfs in a winning position, but how u handle urself while the trade is running that s gonna dictate ur bottom line. agian, this is just my honest opinion based on my learning curve. also, consistency is a mindset. it s ur mind that makes u deviate from ur plan, setups and so on, not necessarily the strategy.
here s an example of a 1 to 12 RR trade lol, just to laugh it off. also this past week, R5 and even R7 were possible, but not every trade is gonna do that, and sometimes even the perfect textbook setups fail.#
the oil trade is from this past week that i took, simple setups, risking 1%. thing is i m pretty comfortable losing 1%. ofc i didn t set the trade and walked away, praying it s gonna go R50 , but i watched it closely, saw no problem with it, buyers were scarse, not even for a proper pullback, so i let it run. if issues apear, i might take partial profits, trimm down my risk etc. but i gotta try and stay in as much as possible without ignoring the new info as he trades move along. http://prntscr.com/usv8su
this is an example of a trade i lost this past week. no regrets. although the background was week, and ussually after the fake break the mark the price down or up, in this case it hit some buyers and decided to run the stops 1 more time just for the heck of it. hit sellers again ofc, but c est la vie. 1% loss is nothing on 1 isolated trade in the grand scheme of things, beeing aware like i said earlier that even the best looking setups fail sometimes.
cheers
The fact you choose to respond and justify these totally ridiculous theoretical and totally unmanageable/unrealistic figures means we probably should limit our interaction. Any day trader worth their weight in salt knows you don’t trade to formulas. You have to listen to and trade in the here and now. Trying to speculate to formulas/theory like this is just a brokers dream and a recipe to destroy your account. Your not in sales are you cause it sounds like a sales pitch.
Listening to filth like this early on in my speculating days set my skills back years and you would be best not preach that filth to noobs who will hang on your word as gospel.
Risk control is very important in forex trading. It is never possible to move forward in trading without risk control. I agree to risk 2% for each trade. And I always try to trade at a 1: 2 risk-reward.
Every trader should take risk control. It is never possible to survive in trading without risk control. As a trader, I always try to maintain 1: 2 or 1: 3 risk rewards. And don’t risk more than 2% for each trade.
but for newbies better to trade with small leverage 
untill u will not find ur style of trading 
, but i watched it closely, saw no problem with it, buyers were scarse, not even for a proper pullback, so i let it run. if issues apear, i might take partial profits, trimm down my risk etc. but i gotta try and stay in as much as possible without ignoring the new info as he trades move along.