Safety Trading Rules Ideas 1 – Risk Management
The main concept of safe trading is how to manage and reduce risk properly, so that when you predict the wrong movement of the market and you lose, that loss can be minimized. So your losses are measured and planned losses in your trading plan.
Follow the trend
Support and Resistance
Profit from your trading, managed by considering the risk reward ratio. In the analysis of current or recent market price movements, there is no standard ratio between profit and loss that must be made, all ratios are flexible depending on strong support and resistance points taking into account the direction of the trend. Make sure you look at the direction of the daily trend, don’t try to fight it. Trend is Your Friend.
It doesn’t have to be 1:2, 1:3, 1:4 or so on. It could be that your loss ratio is 2 times longer to 2:1 (2 as risk and 1 as reward). I suggest the maximum safe risk for a funded account in 1 trading position is 1% of equity so that your account is safe.
You can close a position with a profit if in a day it has not reached the TP or vice versa. You can also move the SL point to the BEP position to secure your profit if market conditions are uncertain, such as facing the news.
The main benchmark for calculating the risk reward ratio is the point of support and resistance. Meanwhile, to adjust the amount of risk by adjusting / changing the lot size in your trading position. Suppose you get 50 pips for losses and 40 pips for profits, meaning the risk reward ratio is 1:0.8.
So calculate it by first limiting the amount of loss. If your equity is $10000 with a value of $1 per pip for 1 lot, then your loss should not exceed $100 (1%) in one trading position.
The calculation becomes $100/50 pips = 2 Lots
So you can open a position of 2 lots with 50 pips SL and 40 pips profit of $80 (0.8%).
The profit becomes smaller than the risk of loss, that’s because we limit profits and losses according to strong support and strong resistance.
Another example, we turn the risk reward ratio to 0.8:1, namely SL 40 pips and TP 50 pips. If you trade with a maximum loss of $100, then the calculation is as follows:
$100/40 pips = 2.5 lots.
Loss on loss of $100 (1%)
Profit if profits are $125 (1.25%)
The above applies to multiples for each of your trading positions to make it safer, for example SL = 400 pips and TP 500 pips, then you only open a position of 0.2 lots for an account with an equity of $10000.
If your account equity is only $2500, then the lot value for the position is divided by four into 0.05 lots.
Make sure equity as the basis of value is used, not balance in multiple positions.
This is really cool! Thanks for the insight. Risk management is big chunk in our trading success. No matter how good your edge is if we don’t have proper sizing and risk management, we won’t able to sustain it long term. That’s the reality