ok… im total newbie… ive been trading a demo account… and i have a good general grasp on market analysis fundamental and technical… technical being my favorite…
one question about money management…
how do i go about keeping a 1 to 3 win loss ratio???
and how would i go about doing so with a 1000 dollar micro account… i wouldnt want to risk more then 2% per trade and dont want to have to much leverage at risk of having major losses…
for instance… if im going to place an order… what would my order look like to minimize risk, as far as how to control leverage???
maybe this doesnt even make sense… but thanks for any help anyways!!!
A win/loss ratio simply means that your trades win more than they lose. How you go about doing that depends on your system. For example, if your system wins about 50% of the time, then your target profit needs to be 3 times larger than your stoploss to have a 3:1 ratio. On the other hand, if your system wins 80% of the time your target profit can be less than your stoploss. Without knowing your system I can’t tell you how to have a 3:1 ratio.
As for money management, the general rule is to risk no more than 5% of your account per trade, with 2% probably being the ideal number. Say you were about to take a trade with a stoploss of 50 pips. You want to risk 2% of your $1000 account, which is $20. So you divide $20 by 50 pips and you get .40. That means you want to risk 40 cents per pip on this trade. Then based on what a lot equals on your account you know how many lots to trade. For example if your account is $1 per lot you would trade .4 lots, .10 per lot then trade 4 lots, etc…
You should basically follow the old maxim,
“let your profits run & cut your losses short”
With a 1:1 ratio & a system which wins 50% (5 of 10) of the time theoretically you should break even,
but of course this does not take into account spread, fees, etc.
so basically what your saying is, set my limit 3 times as far from my entry as i set my stop??? cuase with this aproach i seem to run into the problem of getting stopped out alot…
i guess i should be setting everything further from my enrty…
like i said im a total newb… i just finished the schol of pips… took tons of notes and really wrapped my head around it… im looking for the nextstep in my education… any suggestions???
If you’re a total newbie I would look in the Blogs section of Babypips and read “Art of the Chart” by NickB and “Pip my System” by Pip Surfer. Start practicing one (or both) of the systems on a demo account until you get the hang of it.
You’ve learned the tools, now you have to implement them. The next step is to learn different systems and methods and find one which may suit your comfort and style. Learning the tools in the school will help you understand different systems and how/why they work. You also have a basic understanding on how to tweek the parts of a system for you as well.
There’s plenty of methods on this forum that you can learn for free like “alternative technical templates”… that thread is my favorite… check it out!
thanks everyone… i checked out surfer dudes system and ive been watching the eur/usd with it… im gettng a better feel for placing trades, and have been having a better record of wins and losses… on thursday i totaled 50 pips… on a demo account no less, but major improvement since ive been developing a more structured system…
also like to say i think this forum, and whole web site, is awsome and plan on using it very much to educate myself… thanks for the help!!!