Risk management

Dear Trader! Before we get into my first blog post, I would like to introduce myself, so you'll know a little bit about me. I wont be too long I promise. My name is Sebastian and I'm 27 year old in the time of writing this post. I trading Forex for five years now, it was a lovely journey I must say.. However, throughout the 5 years time span I gained a lot of experiences in the market, failed a lot and as well achieved quite some things I must say. But at first it was not easy, it was a hard journey for me due to lack of informations on the internet back in the day, but still I had that drive inside me that " I CAN DO IT " no matter the circumstances. I learned a lot about myself, from the psychological aspect, to the technical analysis and as well the fundamentals - Economy. What drives the market from A-B and how to use the knowledge + experiences for my own good. What I had found out few years ago is that no matter how much knowledge you have or experiences, in order to be consistent and profitable on the long run, you have to know about the RISK MANAGEMENT, this is the one thing that is making troubles among the traders world wide, because one day you can gain a lot and then the very next day you can lose it all or even more. So I want to dive deeper into that with you. What is RISK MANAGEMENT? Risk management is the crucial part of the trading, while executing the trades, how many trades, what risk do you use per trade and as well how good are you managing it. I always teach my students to use no more than 1% risk per single position, you can as well go with the 0.5% if you feel more comfortable while actively trading. Your lot size vary depending on your account balance and how big your stop loss is in a sense of "pips". Using proper risk % can save you a lot of trouble, losing the account, breaking the funded company rules and as well your mindset. What is 1% risk per trade according to the 100.000USD account? Example: Account balance: 100.000USD Risk % used: 1% Stop loss ( pips ): 20 Pair: EURUSD Your lot size calculated is: 5.0 You're risking 1.000USD Which means that if your position hit the stop loss, you will only lose 1.000USD or 1% Now, how to use that in the trade management is quite simple. Your trades must be minimum 1:3 Risk to Reward Ratio, which means that you will use 1% to gain 3% per trade if everything goes according to your technical analysis of course, because nothing is 100% thats why we are using proper risk management at all times. What if I lose and how do I re-gain the loss and make a profit? If you use 1:3 RRR and you lose the trade, which results of -1%, there's nothing to be worried about. The very next trade can be right around the corner and of course you will need all the technical confluences to take the trade, not just taking any trade because you can etc. And lets say your very next trades goes by the plan and hit the 3% in profit. With this being said, you will cover the loss of -1% and gained 2% in the profit, so at the end of the day your account balance is +2%. I hope this little insight into the risk management will help you grow and develop in the right path of trading. Sincerely, Seb.


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