Which is the simplest risk management strategy?
Its not a simple subject.
A key rule that many traders follow strictly is that the maximum capital risked per trade is not more than 1%, some prefer to say 2%. But you still need to identify a rational price level for your stop-loss which is a more technical process always with more than 1 correct answer.
If you’re trading on the daily timeframe then you can try the No Nonsense Forex money management system. It uses the ATR to determine your stop loss and take profits and risks 2% on each trade.
Its simple enough to code into an trading algo and I made a video showing how to code it up in cTrader if you’re interested. NNFX Bot money management system
A risk management system gives an organized and lucid way to deal with distinguishing, evaluating, and overseeing hazards. It works in a cycle for routinely refreshing and investigating the evaluation dependent on new turns of events or activities taken.
The size of the order does not exceed 1% of the capital.
Drawdown is allowed no more than 7-8%.
Profit - not less than 1% per trading session.
I like this variant.
Many people are interested in trading. Because trading is possible to make money. However, the risk must be maintained. 1: 2 or 1: 3 risk rewards must be maintained and traded. And no more than 2% risk can be taken for each trade. You have to manage it after trading.
Thank you for your reply
You must distribute the capital so that you understand what you can use in your work (active) and what you need for the reserve.
As my risk management strategy, I usually use stop orders, profit taking, and protective puts in a smart way in my trades.
A part of risk trading. Every trader needs to maintain risk. I trade by maintaining 1: 2 risk rewards.
Thanks for sharing. Do you have a mentor?
Don’t trade reversals, only confirmed trends.
As long as your take profit is greater than your stop losses and you strictly adhere and not improvise trades, even a 50% win rate can be massively profitable.
Oh yeah, and avoid news events.
First understand the forex market, know about leverage, make a good trading plan, do set your risk - reward ratio, manage your emotions and practice on demo regularly.
According to me, the simplest risk management strategy is always using stop loss in my trades.
i have just seen a risk management plugin for MT4 anyone use any thing like this.
For me, the simplest forms of risk management on a trade is placing a stop-loss order. I never trade without stop loss.
I totally agree with you, making an organised risk management system can definitely help in determining the leverage as well as will help in minimising the risks.
You can try not to risk more than 2% of your trade and also use some tools and strategies to reduce risk. I usually go with stop loss and limit orders for executing a safe trade.
I prefer using stop loss. The benefit which I have got through this is I don’t need to monitor my holdings daily, it automatically limits the loss on my position that starts making an unfavourable move.
There’s no one risk management strategy that you can brand to be the best. Everyone’s cool with the one that won’t suit the other trader. Like I was quite happy with placing the stop-loss but my sister’s still confused with the concept. She’s happy trading with low leverage.