So now let’s say I’m trading a 1,000$ account, I risk 5% per trade I have a 3 win - 0 loss week so if I’m doing 1:2 risk to reward I’m walking away with 30% gain, The week after the 3 wins when the market opens, do I risk 5% of my initial 1,000 plus the 300$ I earned in profits or do I risk the initial 1,000$ even though my account size is now 1,300$?
for simplicity.
week 1:
Starting Balance: 1000$
Risk 5% per trade:
Risk to Reward 1:2.
First week: 3 wins - 0 looses.
Gain for first week: 30%
Balance after the first week with wins. is: 1,300$ Which is 30%
for week 2: do I risk 5% of 1,300$ or 1,000$?
The % risk always stays the same, as a percentage of your account capital.
5% per trade is quite aggressive. Many traders go no higher than 2%. Bear in mind that you only need to make 6% per month in order to double your account over a year. If you double your account, you will also double your profits - imagine a job where the boss said if you don’t get fired I will double your salary this time next year: and the year after that: and every year after that…
Bear in mind that a r:r ratio of 1:2 is pure theory when you plan the trade. It helps if you use a strategy and entry pattern and TA features which, combined, have a history of usually producing a reward 2 x the risk when used in this way.
Youre always counting your % at your current balance. Thats the idea of compounding. My advice is just to adjust your %. 5% is very much. In example i`m using no more than 1% or in some less risky trades max 2%.
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Thanks for the advise guys!