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Riskmanagment

KOG - "Fail to plan, plan to fail" Traders, The market is designed to confuse retail traders, the reason for that is they know 95% of you enter these markets with no plan. You’re not aware of the levels, you’re not charting the pairs you trade, and you lack the basic skills to manage your money and your risk. You need to have a plan before you enter a trade, you need to have a strict set of rules, and everything should line up as much as possible before you take the entry. By the time new traders understand they need a plan, they’ve blown their accounts and blame the markets. Every trader, before they start their day needs to have a strict set of rules they abide by before entering the markets for a trade. There are many variations and most will have their own rules, but to start you off here are a few we set out for our traders. They're not uncommon, simple steps to take to keep you safe in the markets. Is the market ranging or trending? We have to adapt our trading style in accordance with what the market is doing. If it’s a trending market, we know we have a clear direction on the pair and we know the levels of the trend as well as the levels that are provided. We then add the target to this and now have a clearer understanding of where price may support or resist before continuing the trend. When the market is ranging, we adapt our trading style knowing that we’re going to experience a lot of choppy price action as well as extreme up and down swings. We plot the range, we add the levels, and we now have a clearer understanding of support and resistance as well as the range high and low. When the range breaks and confirms the break, you know whether you should be entering or getting out of a trade. Holding on to hope will kill your account and you will then blame the market. Are there key levels above or below? Key levels on a chart are really important to understand. You need to add the levels on the long term charts and the levels on the short term charts. This gives you an idea of where price may go before it either supports or resist the price. It also tells you whether price is going to continue in the direction if the key level breaks and the turns into either support or resistance. You can now plan, if the price continues into that level how much will my account be in drawdown, will I be able to hold, do I need to hedge, should I take the loss and switch direction. Holding on to your bias and hope will very likely kill your account, you’ll then blame the market. How much capital am I risking? You need to treat this as a business, no matter what your account size. Every day there are large institutions who want to take your money away from you, you’re in this market to take from them and give them as little as possible. You should have a risk model in place, am I going to risk a certain percentage of my account? Am I going to stick to a stop loss of a certain amount of pips? Am I going to have a risk reward that makes sense? Your stop loss and risk management plan is your best friend in this market, it allows you to limit the losses and live to trade another day. It also allows you to trade with a fresh mind everyday because you’re not holding on to hope. Traders fail because they don’t have a risk model, they then get stuck in a drawdown which doesn’t allow them to trade because they’re waiting the entries that are in drawdown to come back into the price range. Cut your losses early, if you’re wrong you’re wrong, don’t let your ego right checks your butt can’t cash! Holding on to losing trades with no risk model will likely blow your account, you’ll then blame the market. Are there any new events? News events can move the markets in a very aggressive way but will move the price into the levels that you should already have added to your charts. News brings volume and a lot of traders will use this to their advantage to either scalp or to get good entries on the pairs they trade. It’s best practice to not trade before the news releases unless you’re already in the right way of the market. “The trade always comes after the event”, wait for the price to be taken to the level they want to either buy and sell, wait for a confirmed reversal on the smaller time frames, once everything lines up, then look to take an entry. Trading news events comes with years of practice, it also takes a lot of discipline and the ability to manage risk, not only that but you have to be willing to switch your bias in an instance if you get it wrong. Most traders lack this experience, trade news events like it’s a normal day on the markets and then blow their accounts in one hit, you’ll then blame the market. Am I following my trading plan? “Fail to plan, plan to fail”. As above, you need to plan every single trade you take, make sure the market conditions are in your favour, make sure the price is at the right levels, make sure your risk model is in place, make sure you’re aware of the risks involved if it doesn’t go your way. By doing all of this and making a plan, you know what the worst case scenario will be, by knowing that you’re emotions and psychology won’t be affected that much and you will build your confidence. You’ll then develop your strategy and you’ll have a better understanding of what kind of ROI you can consistently make in the markets. Have the discipline to follow your plan and stick to it like a you’re a robot. Get used to taking losses, this is part of the game you’re in. Your wins just need to be bigger and you’re on your way to becoming a consistent trader. Most traders don’t follow their plan, they then blow their accounts and you’ll blame the market. Hope this helps at least some of you stay the right side of the markets and we wish you the very best in your trading career. As always, trade safe. KOG
FX:XAUUSDEducation
by KnightsofGold
12
Here is WHY You Must Learn TRADE MANAGEMENT Hey traders, In this post, I will share with you my tips for trade management in Forex trading . But first, let me elaborate on what is exactly a trade management . Trade management is the set of rules and techniques applied for managing of an already active position. Trade management is a very important element of any trading strategy that should never be neglected. 1. Never remove a stop loss Being in a huge loss, many traders refuse to admit that they are wrong. Instead, watching how the price moves closer and closer to a stop loss, they remove stop loss hoping on a coming reversal. The alternative situation may happen when the price is going sharply in the desired direction. Watching the increasing profits, traders remove a stop loss (and occasionally take profit), being afraid to miss bigger profits. Both situations may lead to substantial, higher than initially planned losses. Driven by many factors, the market can easily burn all gains and move against the desired direction much longer than traders stay solvent. Take a look at this long trade on Gold. When the price comes closer and closer to a stop loss, many traders can not take a psychological pressure and remove stop loss, being afraid to take the loss. However, most of the time, stop loss will help you to limit your losses. You can see that after Gold reached stop loss, the price dropped much lower. Removing the stop loss, you would inquire bigger losses. Never remove a stop loss. It must be always set. 2. Never modify your stop loss if a position is in loss Watching how the price moves closer and closer to a stop loss is painful. Instead of removing stop loss, some traders move it and give the market more space for reversal. Even though such a technique is safer than the complete stop loss removal, it is still a very bad habit. Each stop loss adjustment increases the potential loss, not giving any guarantees that the market will reverse. It is highly recommendable to keep your stop loss fixed and let the price hit it and admit the loss. Above is one more example, why the earlier you close the trade in a loss, the better. Modifications and adjustment of your stop loss will most of the time lead to even bigger losses. 3. Know in advance your profit protection strategy Where do you take your profit? Do you have a fixed tp level or do you apply trailing stop? You should always know the answers. Coiling around take profit level but not being able to reach it, the price makes many traders manually close the trade or move take profit closer to current price levels. Another common situation happens when the market so quickly reaches the desired TP level so the traders remove TP hoping to make bigger than initially planned profit. Such emotional interventions negatively affect a long-term trading performance. TP removal may even burn all profits. Do not let your greed intervene, and always follow your rules. Above is the example of trade management rules in Forex trading. After GBPUSD reached a key support, a long position was opened from that. Once the price moves up by a certain distance, stop loss will be moved to entry. Take profit will be the closest key resistance. 4. Never add to a losing position Watching how the price refuses to go in the intended direction and cutting a partial loss, many traders add to a losing trade in hopes that the market will reverse and all the losses will be recovered. Again, such a fallacy usually leads to substantial losses. Remember, you can add to a position only AFTER the market moved in the desired direction, not BEFORE. Just imagine what could happen with your trading account, if you kept adding to a losing short position in a recent crazy bullish market on Gold. 5. Close the trades manually only following rules Quite often, newbie traders manually close their trades because of some random factors: they saw someone's opposite view, or they simply changed their mind. Remember, that if you opened a trade following your trading plan, you should always have strict rules for a position manual close. Do not let random factors affect your trading. Above is the example how you could easily miss a lot of pips on Gold, simply because the market temporarily stuck on some resistance. Following these 5 simple tips, your trading will improve dramatically. Remember, that it is not enough to spot and accurate entry. Once you are in a trade, you should wisely manage that, following your plan.
OANDA:XAUUSDEducation
by VasilyTrader
8
A Trading Plan MUST Include A Sound Risk Management StrategyOne of the biggest mistakes a trader can make is to neglect the aspect of risk management. In this video, I divulge the most pivotal lesson I’ve gleaned from my experience in trading. During the initial years of my trading journey, I disregarded the importance of risk management, which proved to be detrimental in a significant way. The watershed moment of my trading career came after incurring substantial financial losses. This experience was a stark revelation of the imperative nature of a robust risk management strategy for trading success. It was an excruciatingly costly lesson. Should you have bypassed dedicating time to understand risk management, you might be on the brink of a potential calamity. By watching this video, I hope you can sidestep the blunder I once made in the nascent stage of my trading endeavors.
Education
by fxtraderanthony
Avoid Forex Mayhem with Good Risk ManagemenTrading forex? Stop gambling with your capital! This video exposes the massive mistake new traders make - using inconsistent lot sizes. It's a recipe for disaster, blowing accounts and crushing dreams. But there's good news. Discover the secret weapon of successful traders: consistent lot sizing. In this actionable video, you'll learn: Why fluctuating lot sizes blindfold you to risk and leave you exposed The simple formula to calculate safe and sustainable lot sizes How consistent sizing fuels confidence and boosts profits Bonus tips to maximize your forex trading performance Say goodbye to trading nightmares and hello to controlled growth! Watch this video now and take control of your forex future. P.S. Don't be the trader left behind. Watch before it's too late!
Education
by fxtraderanthony
🧿How to be a Trader, not a Gambler⛔Hi. ✅Using technical analysis and fundamental analysis at the same time: By combining technical and fundamental analysis, you pay attention not only to the patterns and behavior of price action traders in the past, but also to the fundamental and economic factors that act as the driving engine of market movements (macroeconomics). Together, these two approaches provide greater ability to understand market fluctuations and also create a harmonious relationship between charts and economic factors active in the market, allowing you to determine more effective entry and exit points and make your decisions using Take a more comprehensive and principled view. ✅Mastery of a strategy A strategy for a trader is like a guide to a lost traveler. A trading style helps you stay on track and achieve your long-term goals. With the strategy in sensitive market conditions, you will not get confused and incur irreparable losses. You also analyze your transactions more accurately. There are different strategies in forex, but it is better to have a strategy that you completely trust and that is very efficient and profitable. ✅Accuracy of transactions with risk to reward greater than 1 : A gambler doesn't care when it's the right time to enter a trade. Sometimes the markets do not have the conditions to enter into the transaction and they do not give you a good reward for the risk. Once you have analyzed the market as a professional trader and your entry triggers are activated, you actually have to wait until you can implement the rules of capital management. In these cases, you should watch until the market gives you a risk to reward of 1 to 2 or 3 and the entry is allowed. ✅Capital management As a trader, it is necessary for you to have risk management in trading to preserve your capital. Not using capital management may empty your entire financial account. Gamblers do not care about capital management and they may invest their entire assets in one trade. Therefore, it is better to determine the amount of your loss in each trade and exit when the trade does not go according to your expectations. Of course, loss is an inseparable part of the trading system; If the loss is small, a lesson will be learned from it and it will be helpful in the future. 🔔In the end, regardless of the above, like a gambler, your percentage of success versus loss is 50-50 in each trade, but if you follow the above, you can increase your win-to-loss percentage. __ _______ _____ _________ _______ ______ ______ ______ ______ _____ _________ ________ ❤️If this text was useful for you, please like it and share it with your friends
BITSTAMP:BTCUSDEducation
by CobraVanguard
What do you do when your trading plan fails? Yesterday I wrote about a beautiful chart pattern that was forming on the Bitcoin daily time frame that ended up failing not long after I wrote the post. That kind of thing will shake a trader to their core, especially if they thought it was going to play out, but ended up losing their shirt. This is why it is important to set stop losses, so that if the trade does go the other way, you will be out of the trade before it gets too bad. This is simply called risk management, and is one of the biggest things that any trader, especially new traders need to master. Trading is a business of statistics and probabilities. Just because something has worked for you in the past, doesn't mean it is going to work for you every time. So when something like a bullish pattern that you have traded many times fails, you have to reassess and move on to the next trade. Out of 100 trades, that pattern may only work 6 or 7 times which gives you a 60-70% chance of it working in your favor. That's how it works, nothing is ever 100% in this game. So you always have to be ready for things to not work out the way you think they should. If they don't work out, don't freak out! Just learn from your mistakes, readjust your plan, and move along to the next trade! Hopefully things like this will help you better understand the importance of a good risk management plan. Be safe out there everyone and trade logically!
COINBASE:BTCUSDEducation
by thelogicaldude
High Returns, Low Risk: Unveiling a Winning Investment StrategyI am pleased to introduce a robust long-term strategy that seamlessly combines performance with an enticing risk profile. This strategy involves strategically investing in ETFs indexed on the S&P 500 and ETFs backed by physical gold. Let's delve into the rationale behind selecting these two assets: S&P 500: 1. Automatic Diversification: Instant exposure to a diverse array of companies, mitigating the risk associated with the individual performance of a single stock. 2. Low Costs: ETF management fees are typically low, facilitating cost-effective diversification. 3. Liquidity: Traded on the stock exchange, S&P 500 ETFs offer high liquidity, enabling seamless buying or selling of shares. 4. Historical Performance: The S&P 500 has demonstrated consistent long-term growth, making it an appealing indicator for investors seeking sustained growth. 5. Ease of Access: Accessible to all investors, even those with modest investment amounts, requiring only a brokerage account. 6. Simple Tracking: The S&P 500 index simplifies market tracking, eliminating the need to monitor numerous stocks individually. 7. Dividends: Companies included often pay dividends, providing an additional income stream. 8. Long-Term Strategy: Ideal for investors pursuing a long-term approach, S&P 500 ETFs are pivotal for gradual wealth building. 9. Geographical Diversification: Investing in an S&P 500 ETF offers not just sectoral but also geographical diversification. Despite the U.S. base, many included companies have a global presence, contributing to international portfolio diversification. Moreover, Warren Buffett's 2008 bet, where he wagered $1 million on the passive S&P 500 index fund outperforming active fund managers over a decade, underscores the difficulty even seasoned financial experts face in surpassing the market's long-term return. This further strengthens the notion that choosing an S&P 500-linked ETF can be a prudent and effective investment strategy. Investment in Physical Gold ETFs: 1. Exposure to Physical Gold: Designed to reflect the price of physically held gold, providing direct exposure without the need for physical acquisition, storage, or insurance. 2. Liquidity: Traded on the stock exchange, physical gold ETFs offer high liquidity, allowing investors to buy or sell shares at prevailing market prices. 3. Diversification: Gold's unique reaction to market dynamics makes it a valuable diversification asset, potentially reducing overall portfolio risk. 4. Lower Costs: Compared to physically buying gold, investing in physical gold ETFs proves more cost-effective in terms of transaction costs, storage, and insurance. ETF management fees are also relatively low. 5. Transparency: Managers regularly publish reports detailing the gold quantity held, ensuring transparency about underlying assets. 6. Accessibility: Physical gold ETFs offer easy market access without the need for physical possession, appealing to investors avoiding gold storage and security management. 7. Gold-backed ETFs: These ETFs physically hold gold as the underlying asset, with investors often having the option to convert their shares into physical gold. After extensive research and backtesting across diverse ETFs covering various asset classes, including bonds, real estate, commodities, and stocks of financially stable companies, my findings notably highlight a standout option during times of crisis: physical gold ETFs. The strategy hinges on leading indicators, powerful economic tools. Leading Indicators: Leading indicators, or forward indicators, are crucial tools in economics and finance for anticipating future trends. In contrast to lagging indicators, which confirm existing trends, leading indicators provide early signals, aiding informed decision-making based on anticipated economic developments. Key characteristics include: Trend Anticipation: Early insight into upcoming changes in economic activity, facilitating preparedness for market developments. Responsiveness: Quick reactions to economic changes, sometimes preceding other indicators. Correlation with the Economy: Association with specific aspects of the economy, such as industrial production, consumer spending, or investments. Examples include: • Housing Starts: Providing early indications of the real estate market and construction investments. • Net New Orders for Durable Goods: Indicating business investment intentions and insights into the manufacturing sector's health. • US Stock Prices: Considered a leading indicator reflecting investor expectations. • Consumer Confidence: Measuring consumer perceptions and influencing consumer spending. • Purchasing Managers' Confidence and Factory Directors: Offering insights into production plans and future economic trends. • Interest Rate Spread: Indicating economic expectations and influencing borrowing and investment decisions. Returning to the strategy, I leverage entry points calculated by a meticulously developed strategy incorporating leading indicators applied to the SPY chart. The achieved performance of 3496% since 1993, with 15 closed trades, significantly surpasses a buy-and-hold position yielding 1654% in performance. Notably, the maximum drawdown is 5.44%, a stark contrast to the over 50% drawdown seen in an investment in the S&P 500. Upon the indicators signaling the end of the long position, I close my SPY positions and transition to positions in physical gold ETFs. In our example, choosing the GLD ETF yields a performance of 173%, adding to our total performance. While the maximum drawdown, considering the addition of the investment in physical gold ETFs, is 17.65%, slightly higher than the drawdown on the strategy applied to the SPY, it remains impressive for such a prolonged period. Now, if we conduct the backtest since 2007: SPY : performance of 751 %, max drawdown of 4.02 % GLD : Performance of 153 % Since 2015: SPY : performance of 131 % GLD : Performance of 37 % Disclaimer: The information shared is for educational purposes only and is not financial advice. Investing involves risks, and past performance is not indicative of future results. Consult with a qualified financial advisor before making investment decisions. The author is not liable for any financial losses incurred.
AMEX:SPYEducation
by Julien_Eche
6
Don't Talk To Me About... LUCID UNTIL..I only want to hear about LCID once it breaks this trenline... this company keeps getting MILKED and anyone who invested ever after IPO is under water... what a shame. Once this trendline break then I will consider a long and yes 100% with a stop-loss. Calculate Your Risk/Reward so you don't lose more than 1% of your account per trade. Every day the charts provide new information. You have to adjust or get REKT. Love it or hate it, hit that thumbs up and share your thoughts below! This is not financial advice. This is for educational purposes only.
NASDAQ:LCID
by Navitility
DYDX/USDTPossible break and retest happening on DYDX. Let's see if this key level can hold and buyers show that they are in control, or will it break and they need more time. If there will be new crypto bull market, I think Dexes like GMX, GNS and DYDX will perform well, as they will start to bring profitable revenue in and share it with holders of their tokens If you are surprised that altcoins got whacked for the last 4 months against Bitcoin you shouldn't be Post from june about alts No trade is risk free! 1st mistake novice traders do is not having risk management and get their ass burned! -PalenTrade
Long
by PalenTrade
4
AMD DOUBLE RESISTANCE! PERFECT?AMD had a nice pump this week and not it's in a little bit of trouble. There is a confluence stopping it's bullish price action. Two major resistance levels merge and AMD looks like it will need to retrace back to the support below before another attempt at moving higher. If price stays where is it by Monday open, I will enter a short position with my stop above the current local high. Calculate Your Risk/Reward so you don't lose more than 1% of your account per trade. Every day the charts provide new information. You have to adjust or get REKT. Love it or hate it, hit that thumbs up and share your thoughts below! This is not financial advice. This is for educational purposes only.
NASDAQ:AMD
by Navitility
2
GBPJPY Pair: Anticipating Bullish Breakout in the OffingOptimistic indicators have recently graced the GBPJPY forex pair. Analyzing the daily charts, a bullish momentum is clearly reinstated, with two consecutive daily closings above the significant 50-day moving average. Moreover, the hourly chart illustrates a robust consolidation within this burgeoning bullish trend. We are poised for a potential breakout above the critical resistance at 183.248. Should we secure a decisive hourly close above this level, we'll activate a buy order. This strategy ensures precision in capitalizing on the ascending momentum. The risk management plan includes a stop loss (SL) firmly positioned at 182.49, just below our consolidation pattern. As for the take profit (TP) point, our analysis points towards the region of the upper Bollinger band on the 4-hour chart, estimated at 184.955. This area also tactfully rests below the crucial round number, fostering an encouraging 2:1 risk-to-reward ratio. Reinforcing our bullish forecast, the Relative Strength Index (RSI) on the hourly chart is under the overbought threshold, indicating the current trend still has room to rally. Concurrently, the MACD suggests a prevailing bullish bias, priming us for the generation of a buy signal. In summary, maintain vigilance for a strong hourly breakout above 183.248 in the GBPJPY pair, and be prepared to engage a bullish position with an effective risk-management strategy.
Long
by formaaaa
LDMR (Long Derivative Mean Reversion)(LDMR)Long Derivative Mean Reversion is primarily a tool for measuring risk and capital efficiency. It's secondary functions include identify outliers in the assignment value of derivatives, maintaining a price target and producing trade placement recommendations. This strategy has one simple input: the symbol of a correlated asset or index. It is recommended to use leveraged indexes in this input because they have a higher derivative correlation with those of round lots of the underlying. When using this strategy you should always adjust the initial capital to what it will cost you to control 100 shares of the security. If you intend to purchase shares then that value is 100x the close price. if you intend to purchase call options to resell for premiums you use the initial premiums paid for the calculation. If you intend to create a synthetic position you should add all deployed capital together, and that calculation will remain accurate until the max profit limit of your short option is reached. Pyramiding is supported for trade placement. You should always review the historical depth and before placing the first trade ensure you have enough capital to cover the largest of those positions. Otherwise your results may be entirely incomparable to the risk and capital efficiency estimates the tool provides. Let me know what you think. I am considering a private publishing and want to know what this is worth!
NYSE:LLY
by KYLEFLYNN
Embracing Risk ManagementEmbracing Risk Management in Forex Trading: In the world of forex trading, embracing risk management is an integral aspect of achieving long-term success and preserving your capital. Implementing effective risk management strategies is essential to navigate the inherent uncertainties of the forex market. Let's explore some key principles of risk management in forex trading. • Define Your Risk Tolerance: Before entering the forex market, it is crucial to determine your risk tolerance. Assess your financial situation, investment goals, and personal comfort level with risk. This will help you establish appropriate risk parameters and guide your decision-making process. • Proper Position Sizing: Determining the right position size is a critical element of risk management. Avoid overexposing your trading account by allocating a reasonable portion of your capital to each trade. A general rule of thumb is to risk only a small percentage of your account balance (e.g., 1-20%) per trade. This ensures that a string of losing trades does not significantly impact your overall account balance. • Utilize Stop-Loss Orders: Implementing stop-loss orders is vital to protect yourself from excessive losses. A stop-loss order sets a predetermined price level at which your trade will automatically be closed if the market moves against you. Place your stop-loss orders based on technical analysis, support and resistance levels, and market volatility. This tool helps limit potential losses and protects your trading capital. • Take-Profit Targets: Setting take-profit targets is equally important in managing risk. A take-profit order enables you to exit a trade when the market reaches your desired profit level. Determine your take-profit targets based on technical analysis, market trends, and reward potential. Regularly reassess your take-profit levels as the market evolves to secure profits and prevent sudden reversals. • Risk-Reward Ratio: Maintaining a favorable risk-reward ratio is crucial for long-term profitability. Aim for trades that offer a potential reward that outweighs the potential risk. A positive risk-reward ratio means that your potential profit is greater than your potential loss. This allows you to achieve profitability even with a lower win rate, as long as your winning trades outweigh your losing trades. • Regular Evaluation and Adjustment: Consistently evaluate and analyze your trading performance to identify strengths and weaknesses. Keep a trading journal to review your trades, assess your decision-making process, and identify areas for improvement. Adapt your risk management strategies based on market conditions, and avoid chasing losses or taking excessive risks due to emotional impulses. [ i]Remember, risk management is an ongoing process that requires discipline and continuous monitoring. Stay informed about economic news releases, market events, and volatility to adjust your risk parameters accordingly. Embrace risk management as a fundamental part of your forex trading journey, and let it guide you towards consistent profitability and capital preservation. In forex trading, success is not solely determined by profitable trades but by effectively managing risks and protecting your trading capital. By embracing your risk management principles such as defining your risk tolerance, proper position sizing, utilizing stop-loss and take-profit orders, maintaining a favorable risk-reward ratio, and regularly evaluating and adjusting your strategies, you can navigate the forex market with confidence and achieve sustainable results. Embracing Risk Management trading GOLD: In the golden path of trading gold, risk management takes center stage as a paramount factor for success. It is crucial to implement effective risk management strategies to protect your capital and navigate the inherent uncertainties of the forex market. Let's delve deeper into the key aspects of risk management in trading gold. • Proper Position Sizing: Determining the appropriate position size is the foundation of risk management. Carefully consider your account size, risk tolerance, and market conditions when deciding how much of your capital to allocate to each gold trade. Avoid overexposure by keeping your position sizes in line with your risk tolerance, allowing for potential market fluctuations. • Stop-Loss Orders: Implementing stop-loss orders is an essential risk management tool. Set a predetermined level at which you will exit a trade if the market moves against you. This ensures that your losses are limited and prevents them from spiraling out of control. Always place stop-loss orders based on sound analysis and risk-reward ratios to protect your capital. • Take-Profit Levels: In addition to stop-loss orders, establish take-profit levels to secure your profits. These levels are predetermined price points at which you will exit a trade when the market reaches your desired profit target. Take-profit orders help you lock in gains and avoid potential reversals that can erode your profits. Regularly reassess your take-profit levels based on market conditions and adjust them accordingly. • Risk-Reward Ratio: Maintaining a favorable risk-reward ratio is essential in risk management. This ratio represents the potential profit you can make relative to the amount you are willing to risk. Aim for trades that offer a higher potential reward compared to the potential loss. By consistently seeking trades with a positive risk-reward ratio, you increase your chances of profitability over the long term. • Regular Assessment and Adjustment: Risk management is an ongoing process that requires continuous assessment and adjustment. Regularly review your trading performance, analyze your trades, and identify areas for improvement. Adapt your risk management strategies as market conditions change and stay vigilant in monitoring your trades to ensure they align with your risk parameters. Do remember again, risk management is not about avoiding risks altogether but rather about managing them intelligently. By implementing proper position sizing, setting stop-loss and take-profit levels, and maintaining a favorable risk-reward ratio, you can protect your capital and create a solid foundation for long-term success in trading gold. In the golden path of trading, risk management is not a choice but a necessity. Develop a disciplined approach to managing risk, and let it guide you towards a prosperous journey where the allure of gold meets the prudence of risk ☆ Good Foreign Exchange Trading Daysz ☆ J
OANDA:XAUUSDEducation
by ATU_TAD
⚠️ Risk:Reward & Win-Rate CheatsheetThe reward to risk ratio (RRR, or reward risk ratio) is maybe the most important metric in trading and a trader who understands the RRR can improve his chances of becoming profitable. Basically, the reward risk ratio measures the distance from your entry to your stop loss and your take profit order and then compares the two distances. Traders who understand this connection can quickly see that you neither need an extremely high winrate nor a large reward:risk ratio to make money as a trader. As long as your reward:risk ratio and your historical winrate match, your trading will provide a positive expectancy. 🔷 Calculating the RRR Let’s say the distance between your entry and stop loss is 50 points and the distance between the entry and your take profit is 100 points . Then the reward risk ratio is 2:1 because 100/50 = 2. Reward Risk Ratio Formula RRR = (Take Profit – Entry ) / (Entry – Stop loss) 🔷 Minimum Winrate When you know the reward:risk ratio for your trade, you can easily calculate the minimum required winrate (see formula below). Why is this important? Because if you take trades that have a small RRR you will lose money over the long term, even if you think you find good trades. Minimum Winrate Formula Minimum Winrate = 1 / (1 + Reward:Risk) 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
8
NZDCAD, Pullback to an area of value, look for sell entries Price action has pulled back an area of which we saw a strong impulse breaking downward from a strong structure level. Price has now retraced back to this area which we could see a nice sell opportunity. Wait for bearish price action and find an entry thst meets your trading plan. Thanks Trade Safe **If you found this idea helpful in any way, hit the LIKE button and FOLLOW me for more analysis and educational ideas** Share your view by leaving a comment below. I appreciate all the feedback.
Short
by ktlfx
What's Risk and Reward ratio vs Profit factorWhat is Risk-Reward Ratio? The risk-reward ratio is a ratio used in investing that compares the potential profit or gain of an investment to the potential loss or risk that it poses. This ratio is often used to determine whether an investment is worth pursuing or not, and can be a helpful tool in managing risk. The risk-reward ratio is typically expressed as a ratio of potential profit to potential loss, with a higher ratio indicating a potentially more favorable investment opportunity. For example, if an investment has a potential reward of $10,000 and a potential risk of $5,000, the risk-reward ratio would be 2:1. Examples of risk-reward ratios can be found in many different types of investments, such as stocks, bonds, mutual funds, and options. For example, a stock that has a potential upside of $20 per share and a potential downside of $10 per share would have a risk-reward ratio of 2:1. Similarly, a bond that offers a potential yield of 6% and carries a potential risk of default of 3% would have a risk-reward ratio of 2:1. In general, a higher risk-reward ratio indicates a potentially more attractive investment opportunity, as the potential gains are greater than the potential losses. However, it is important to remember that higher potential gains also often come with higher levels of risk, and investors should carefully consider their risk tolerance before making any investment decisions. What is profit factor? The profit factor is a metric used in trading that measures the relationship between the profits generated by winning trades and the losses incurred by losing trades. It is calculated by dividing the gross profit of winning trades by the gross loss of losing trades. A profit factor of greater than 1 indicates that the trading strategy is profitable, while a profit factor of less than 1 indicates that the trading strategy is not profitable. A profit factor of exactly 1 means that the trading strategy has breakeven results. Some traders consider a profit factor of 2 or greater to be a good measure of a profitable trading strategy, as it indicates that the strategy generates twice as much profit as it incurs in losses. However, it's important to note that the profit factor is just one metric and should not be used in isolation to evaluate the performance of a trading strategy. Other important metrics include the win rate, average profit per trade, and maximum drawdown. In summary, the profit factor is a key metric used in trading to evaluate the profitability of a trading strategy, and it can help traders to assess the risk and reward potential of their trades. Example: Example 1 - Risk-Reward Ratio: Let's say you're considering buying a stock at $50 per share, and you believe it has the potential to rise to $70 per share. However, you also recognize that there is a risk that the stock could fall to $40 per share. In this scenario, the potential reward is $20 per share ($70 - $50), while the potential risk is $10 per share ($50 - $40). This gives us a risk-reward ratio of 2:1, which means that the potential reward is twice as high as the potential risk. Example 2 - Profit Factor: Let's say you have a trading strategy that involves making 10 trades over a period of time. Of those 10 trades, 6 are winning trades and 4 are losing trades. The gross profit generated by the winning trades is $6,000, while the gross loss incurred by the losing trades is $3,000. To calculate the profit factor, we divide the gross profit by the gross loss, which gives us a profit factor of 2. This means that for every dollar you lose on losing trades, you earn $2 on winning trades. By looking at both the risk-reward ratio and profit factor, you can evaluate the potential risk and reward of a trading opportunity and the profitability of a trading strategy. It's important to keep in mind that there are other factors to consider when making trading decisions, such as market conditions, technical analysis, and risk management strategies.
CAPITALCOM:GOLDEducation
by JackPepperstone
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