Plan the size of the risk and money management
The risk management plan focuses on the magnitude of the risk of each trade, the risk / reward ratio, probability of profit and position sizing. Depending on the type of your trading account, the currency pair that you agree and risk per trade, you will be able to calculate the size of the trade, or the volume at each trade. While the money management plan focuses on setting the magnitude of the risk to equity account in conjunction with the rise and fall of equity or balance in the trading account as a whole.
Some questions to assist in determining the level of risk and money management, among others:
1 Do I consider a very important risk factor?
2 How do I determine the amount of risk (or the stop level), tend to be tight, or flexible?
3 How much risk trading strategy that I use? (accuracy of every trade, combined with the risk / reward ratio per trade).
5. money management approach what would I use?
6 What should I do when there is a sizable drawdown?
7 What risk that may be incurred by my broker and my computer (hardware risk)?
Examples of answers:
I always consider the risk factor is very important, therefore I am always careful. Risks can not be avoided, and I was always worried about the potential risks when I hold the position for too long. Therefore I tend to trade in the short term with the frequently enter and exit the market. The longer are in the market the greater my concern would happen something that is not profitable. I will immediately take profits or cut losses by determining a strict stop loss levels and the risk / reward ratio is not too high.
I am currently applying the risk / reward ratio is approximately 1: 1, sometimes more sometimes less. The amount of stop loss and profit targets relatively depending on market conditions. Average between 25 to 50 pips. Figures risk / reward ratio that is less than adequate and in the long term is not profitable, therefore I always evaluate my strategy and do a back-test to obtain a greater percentage of profits.
In terms of money management to trading account, I took a risk 1% of account equity on each trade I have done. Because often go on EUR / USD, with equity $ 1,000 and a stop loss of 50 pips, I can trade with the 2 micro lots so that the total risk for a 50 pip is $ 10 or 1% of the equity. Money management approach that I use is the fixed fractional, I trade 0.01 lot per $ 500, by raising or lowering each USD 500.
I started with $ 1,000, the amount that I can Relax as risk. Lot size for this is 12:02, in accordance with the rules of money management that I agree. Another strategy I use is to lock the profit I have gained with trailing stop technique which protects 50% of the profit after move 15 pips. I will stop trading for the day when 5% of my account loss. If the drawdown experienced by 30% in the period that I specify, I will stop trading for a month and another evaluating money management approach that I use.
My main broker includes a large and well-known broker, I do not use alternative brokers because now I have not needed it. In the event of interruption of hardware on my computer, I have to have a back-up of data and another computer for trading.
