What’s your risk management system?

I’m curious :eyes:to know how other traders manage their risk in great detail if possible… from avoiding the markets instead of trading to sizing to adding to positions, or not etc etc…

Everything is based around the Turtles Risk Management, you can reinvent the wheel but why!

:one: Risk per Trade: Limit to 1-2% of total account balance. :two: Stop-Losses: Always use them to cap potential losses. :three: Leverage: Use sparingly and understand its risks. :four: Market Conditions: Don’t trade in extreme volatility. :five: Position Sizing: Adjust size based on market volatility. :six: Adding to Positions: Prefer averaging up, not down.

These are some risk management practices that have served me well in trading. Remember, no two traders are the same, so it’s essential to find what works best for you.

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Me too, I just came to this topic to see how others manage their risk just because i was curious.

I don’t manage risk.i simply eliminate it

I like to follow a martingale risk profile. I increase risk after each win.

that’s the opposite of what a Martingale does - a Martingale increases risk after each loss

it’s explained here:

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As flamingoproxy said, that’s not Martingale, thankfully, since that system has been proven time and again will eventually blow out your account, without exception. Use it long enough and you will lose it all.

What you are actually describing sounds like a very simplistic version of the Kelly Criterion, a system that was developed for gambling, and actually works better than anything out there, if you can emotionally handle the drawdowns which can feel very painful with large amounts of capital. Though you shouldn’t use a full Kelly when trading, just a partial, say 1/4 to 1/2. It’s a great way to size your positions, if you set it all up correctly.

Great book on this, if anyone is interested is “Fortune’s Formula”. It’s a great read and also explains the Martingale system in detail and why it is always doomed to fail. The short on why, is because your capital isn’t infinite, and eventually a losing streak WILL wipe you out.

Edit:

I feel I should add that I do not advocate for using solely the Kelly Criterion for determining your lot size. First and foremost, I think you should start with a technical analysis of where you wish to place your stop loss. The distance from your entry, coupled with the Kelly Criterion would give you your position size.

I’ve got a month or more before I’m ready to really start playing around with it, but my intention is to set up an excel sheet that I will automatically track my wins and loses in and run the Kelly Criterion as a formula against that data, coupled with my current capital and the number of pips my SL is from my entry to automatically generate my lot size based on each individual trade.

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I use manual trailing stop to manage my risk when I’m right. I trail accordingly based on price action and market structure. It depends on the individual trade since I am a discretionary trader. I am expecting an explosive move in the direction that I wanted. But, sometimes the strength can suddenly goes ‘kaputt’ so trailing can help me reduce some risk or even scratched with a little bit that can cover some previous losses and trading fees.

I try to keep my trading leverage lowered and trade currencies with narrow spread.

As an ex-professional horseracing bettor, the question of staking plans always cropped up. I have voiced my opinions on Martingale in other threads - I can only say that many years ago I thought that John Kelly was a raving mad man and should have been locked up, my opinion has not changed!

The Kelly Criterion, especially with reference to forex, is probably a faster way to the poorhouse than Martingale :rofl:

Staking plans do not work. Level stake a percentage of your bank.

I would like to add, not to cause confusion, that adding to winning trades is okay, as you are increasing from a winning position. In effect your bank has already increased.