I feel this is something that is less discussed than actually making profits but to me this is the most important thing to cover when talking to a beginner trader. This all comes from self experience and growth. You are not going to believe how many times I get DMs on Instagram or Facebook from people asking me about if I have a higher than 90% win ratio. Of course I don't, and to be completely honest I don't know anyone who does. It's unrealistic but more importantly it's not sustainable. Let me start on this note. It's all about sample size kid. Real traders dwell in analytics. We (over) analyze our past performance like a judge in Top Chef because we know that the only way to keep us in the game is to never drop the ball. Keep pushing. Focusing on having a high win ratio just for show is not the right mind set. The reason is because I can show you a 90% win ratio over a period of time but it will cherry picked and it would definitely not reflect my real win ratio on a big sample size (1-3 months of trading). What annoys me the most is that beginner traders focus on this. Whilst is something very important (having a winning trading system) in my opinion it's not what's most important for survival. Risk management is. If you don't understand how to manage and mitigate your losses you will be out sooner than later. Here's a few rules that I personally follow very strictly to keep my losses small. Rule #1: Avg. risk per trade 0.40%-0.75% That's right, my risk % per trade is small and there's a reason for that. Because I trade quite a few markets and 2 strategies I keep my risk per trade small to be able to take positions on different assets with different strategies. Rule #2: Daily Stop Loss: 1% If within a day I get stopped out of my trades for 1% overall, my trading session is over. I close my computer, wash my face and go take a run or just go out. Clear my head to get back tomorrow refreshed. Rule #3: Weekly Stop Loss: 3% If during my trading week I go down 3% I stop trading for the week. The reason is if I get to 3% that means 3 out of 5 days would be in the red and it's time to wrap things up. Rule #4: Time Stop: 24 Hours If after 24 hours my open trade has not gone in any direction I close the trade for a small loss or a small win.
Rule #5: Cross Market Analysis If I'm in a JPY based short trade (GBPJPY Long) for example and I see the Japanese Yen Futures rally I close the trade early. This allows me to have smaller losses when the trade will eventually hit my stop loss level. Rule #6: Do Not Over Trade My max risk % allowed to be open at any time is 1%. This might be divided in various trades and some trade's stop losses might have already been moved closer to my entry. I do not count open trades towards this calculation. These are my basic rules when it comes to risk management and they serve me well. Be smart about this in your own trading because even with a good trading system if you lack risk management skills it's very plausible that you will not make any money. It's always good to trade with a team with whom you can talk your trades out. and that's what we offer here at Forex Trading Essentials. Take our 7-Day FREE Trial and see if this is what you were looking for. Orlando Head Of Trading - FXTE "Success isn't owned. It's leased and rent is due every day." - J. J.