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Risk Management In Forex (III)

Preparation of risk management rewards need not be complicated, even very simple. You just need to answer the two questions below:

How much profit you want from each transaction? How much money you’re willing to put into risk to benefit them?
After you answer, divide the amount of profit to the amount of risk you burn Relax, and as a result you have to get your own reward risk ratio.
Win to Ratio
This ratio is intended to measure how big a percentage of wins versus losses of risk management generated by the trading system. To get it you would have to have a risk management system first, construct the system and test results in the form of back testing forward testing or using the demo account.

You can also do a visual test through the charts if it was easy to do. After that, record the results of how many times the system is making a profit and how often result in failure. Thus risk management you have to get a win loss ratio.

Pareto Principle
“Vital few and trivial many”. Pareto Principle says that 20% of the things that always gets results 80%. Or in other words, 80% of the results obtained from the 20% activity, and 20% of the results are always obtained from 80% of the activity. In terms of trading, the effective profit comes only from a small portion (20%) of your transaction activity.

You do not have to adopt this principle is exactly the figure, the most important thing we must understand is that most of the trading activity usually accounts for only a small part to the growth of our capital.

For example, risk management, say the method has a probability of 60% and a whopping 40% victory. The above principles can be run as illustrated below:

10 Transaction EUR / USD; each transaction has a SL 50 points and TP 100. 6 of the transaction hit stoploss and produce losses, four others making a profit.
6 Transaction Loss x 50 points (pips) x $ 10/poin = – $ 3,000
4 Transaction Profit x 100 points x $ 10/poin = + $ 4,000
Net Profit / Loss = $ 1,000 +
This means that by managing your trading risk management, though still poor methods you can use to generate profit.


Source

Risk Management In Forex (III):32 (20):
 
You do not have to adopt this principle is exactly the figure, the most important thing we must understand is that most of the trading activity usually accounts for only a small part to the growth of our capital.
 
Money management is very important for forex online trading. It is one of the three pillars for a trader. The two other I mean: Psychology and strategy for trading. They are closed related to a trader. A trader should have them in his heart in making decision for open position.
 
in addition to psychological factors, strategy and financial management controls emotions there that need our attention, because without control emotions we can not control our psychology that we pursue a strategy that does not conform to what we should do. therefore emotional control is also very important for us to master the forex trading.
 
Risk managment is one of the most important factor in forex trading we through this method we can enhance our trading capital and secure our fund from any possible loss that may arise from here.
 
its a good calculation but i still comfort with risking about 1-3% from my capital in every trade that we made,and set my sl and tp with a 1 : 2 ratio,that means i can still get profit with one time when my sl hit and one time my tp hits for example i put my sl in 30 pips and tp in 60 pips
 
indeed using the SL and TP in the ratio 1: 2 make us get a good profit, but it is actually very difficult to make a profit at all if we use the ratio of 1: 2, mostly because of the price movement is very unstable by example if we are to benefit 30 pips with hopes to reach 60 pips in fact prices will fall back so that we get the benefit of 30 pips will move down and to the SL can touch us so it is not a benefit that we receive even loss
 
You have shared very good informative post with us. I think we should have very good knowledge of forex trading to prevent from the loss.
 
Risk managment is one of the most important factor in forex trading we through this method we can enhance our trading capital and secure our fund from any possible loss that may arise from here.
yes risk management is very important to have as it help us to take good trading decision accordingly by analysing risk.
 
No matter how long we trying to look at that thing risk management still important for so many trader, it is the first important thing that each trader should do, before they think about profit, if you have a good risk management then profit will come easily later.
 
indeed using the SL and TP in the ratio 1: 2 make us get a good profit, but it is actually very difficult to make a profit at all if we use the ratio of 1: 2, mostly because of the price movement is very unstable by example if we are to benefit 30 pips with hopes to reach 60 pips in fact prices will fall back so that we get the benefit of 30 pips will move down and to the SL can touch us so it is not a benefit that we receive even loss
yes you are right man because most of strategies the stop loss is the double of the take profits like my strategy which i am trading with it the take profits is just 30 pips and the stop loss is 60 pips but the best thing in it the loss trades is just 3 or 4 trades in the month therefore i am trading with it very easy
 
You have shown an example of making profit even with a 40% success rate. The issue however is that if the 60% losses happen continuously then it would result in erosion of most of the capital. A trader may not have enough money to place the same quantum of order. This is in addition to loss of moral strength. That is the reason why trading in financial market is a tough job. It needs great amount of smartness from a trader to overcome the hurdles. The success rate should be at least 70% for a trader to sustain in the market. This is a practical value put forth by a majority of successful professional traders.
 
I do believe that every traders have own risk management calculation. However, the common thing is, traders doesn’t use the margin which it exceed from risk tolerance. So, if traders face loss in result, won’t create high capital decrease impact. Traders can continue to trade still and recover the loss result.
 
IF we talk about the ratio of win and loss i will prefer 1:1 as the normal amount and never less than that. 2:1 is fine because that kind of ratio will help us to maintain our profit if we make one losses later and easier to recover.
 
IF we talk about the ratio of win and loss i will prefer 1:1 as the normal amount and never less than that. 2:1 is fine because that kind of ratio will help us to maintain our profit if we make one losses later and easier to recover.

According to my option: 1:1 is not such a standard profit ratio! In my live trading, I don’t use less than 1:2 profit ratio! Of course, I am interested in higher profit ratios like 1:3; 1:5 even more! Because, this types of profit ratios help me to recover my losing trades.
 
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