Risk Management is the third most important element of trading in my opinion (the initial two are Psychological State and Strategy/Analysis Application).
I wanted to provide some information about how I discipline myself and impose Risk Management into my trading. Before I do that, I want to make it clear that every trader is different; every trader has different goals, targets and monetary requirements. This may not be suitable for your style and you may want to adapt the approach that I use – that’s perfectly fine.
In any case, let’s start with percentage risk per trade that I take and strictly stick by:
- INTRADAY TRADES: 0.5% per trade maximum (50 tick stop loss maximum)
- END OF DAY/ SWING TRADES: 1.5% per trade maximum (150 tick stop loss maximum)
Aside from the above, I also have a few other rules that I impose on my trading and attempt to get across to my Clients. They are:
- You only have x3 attempts to take Intraday positions. If you lose all three – that’s it. You close down the platform and move on to the next day.
- If you incorrectly judge the price momentum during the London session, you only have one more chance to take a trade during the London session. After that, you must wait until the US session money flow to have your second or third attempt.
- If you don’t know why the price is moving in the direction that you’re looking to trade, you should not be trading that pair.
- I only focus on a few pairs – EURUSD/GBPUSD/AUDUSD/USDJPY. Less is more in trading, I am accustomed and comfortable with the assets I follow and the spreads are cheap enough so that the costs don’t interfere with my results.
- We never trade ahead of a key fundamental release. I will only trade out of releases – not into them.
Hopefully this gives you an outline of how I manage my risk and approach to the markets. If you have any questions, use the form below and I’ll get back to you personally.