Risk Management 🧪
In this thread, I will show you a system for good risk management and how it can pay off in 3 months.
First of all, we have to set a percentage for each trade.
The key is to maintain strict discipline in our operations.
You probably don't like the word discipline, I know. Don't worry, by this we just mean setting our own limits.
Key Points for a 1:2 System
- Determine Your Risk 💵
- Decide how much to risk per trade.
- Example: If you risk $100, your target profit should be $200, maintaining a 1:2 risk-reward ratio.
- Set Entry and Exit Points 🚪🏁
- Define where you enter and exit a trade.
- Use technical analysis to place your stop-loss at a sensible level.
- **Never move your stop-loss** once the trade is in progress.
- Be Patient 🧘♂️
- Don't rush into trades.
- Wait for setups that meet your criteria.
- Ensure the 1:2 ratio is achievable before entering a trade.
3-Month Projection
Let's show how powerful risk management can be with a 3-month projection:
- Initial Capital: $10,000
- Profit Rate: 60%
- Trading Days: Tuesday, Thursday, Friday
- Trades: 1:2 risk-reward ratio
Month-by-Month Breakdown
1. Month 1:
- Assume 12 trading days.
- If you risk $100 per trade, with a 60% success rate:
- 7 wins: $200 profit each.
- 5 losses: $100 loss each.
- Total: (7 * $200) - (5 * $100) = $1,400 - $500 = $900 profit.
2. Month 2:
- New capital: $10,900
- Same trading pattern:
- 7 wins: $200 profit each.
- 5 losses: $100 loss each.
- Total: $900 profit.
- New capital: $10,900 + $900 = $11,800
3. Month 3:
- New capital: $11,800
- Same trading pattern:
- 7 wins: $200 profit each.
- 5 losses: $100 loss each.
- Total: $900 profit.
- New capital: $11,800 + $900 = $12,700
By maintaining discipline and a strict 1:2 risk-reward ratio, your capital grows steadily, demonstrating the power of effective risk management.
Let me know your thoughts or questions in the comments below!
