Traders who have experienced would
be very concerned with risk management. Rick Wright, trader and instructor at
Online Trading Academy regards risk management as a 'holy grail' actual
trading. Of trading experience, and from a variety of questions and feedback
when he taught, he wrote a few tips in using risk management as presented in
this article.
Suppose you have a method and a
trading strategy that you believe is the 'holy grail' of trading, and at a
trading opportunity, you are dealing with market conditions so 'perfect' for
the strategy 'holy grail' you. Well, are you going to enter the market at the
risk of the entire capital in your trading account? This is where the use of
risk management factors proportional force. You must have a handle to implement
risk management with a logical and proportional. Here are some tips from Rick
Wright that you can consider.
Tip
1: The amount of risk per trade between 0.5% to 2% of the account balance
If the size of your trading account
is $ 10,000, then the risk per trade is $ 50 to $ 200. The reason is if it
turns out you will experience the loss in a row, you will not be quickly
exposed to margin call, and there will still be the next opportunity to make a
profit.
Tip
2: The number of trading positions at the same time not more than 4
If a big risk per trade 2% of the
account balance, and you use the leverage of 200: 1. With the opening of 40
positions at once, for example, means that you have risked your entire trading
account. Even if you are an aggressive trader, trading off as it was very
reckless and overly emotional. You are very likely to experience difficulty in
managing your trade. It is recommended that at the same time do not open more
than 4 positions.
Tip
3: Determine the frequency of trades per day, per week or per month.
Depending on your trading style, it
is recommended that you determine the frequency of your trades in a day, week
or month. This data will you need when making a journal in the trading plan
(trading plan) for evaluation.
Tip
4: Minimize the position size (lot size per trade) when trading against the
trend
If you are a trader medium term or
swing trader commonly refers to the daily chart to the main trend, but see
trading opportunities in the time frame 15 minutes with the opposite trend, you
can go with the position size half the size of the lot when you are trading on
the main trend. If you use rule 2% of the account for trading on the major
trend, you can apply the 1% for the opposite trend.
The reason is simple: You certainly
do not expect a big profit to trade contrary to the main trend, so it would be
safer if you risk less to anticipate if the trend on the lower time frame
reverse. Usually traders use trading off like this when I'm going retracement
strong primary trend. Small profit target level, as well as the level of risk.
Tip
5: Determine the amount of risk percentage per day or per week
Your $ 10,000 trading account, the
risk per trade 2%, would you open a trading position 20 in a day? Or 20 trading
positions in a week? If all of your trading position loss, then you will lose $
200 x 20 = $ 4,000 or 40% of the total balance of your account.
It is often overlooked when
preparing trader trading plan and only realized after some time the loss within
two days, three days or a week. Although very relative and depends on your
trading strategy, but we recommend that you determine the amount of risk per
trade time period, say 5% per day, or 8% per week.
Tip
6: Use trailing stop or sliding stop loss levels while profit
Experienced traders certainly do.
From experience 'hurt' them as a result of profit that was clasped to 'fly'
away. If you do not constantly monitor the computer screen, you can use the
manual way to shift the stop loss level if it is already in profit, at least to
a breakeven level. We recommend that you make protection early on profits
you've earned.
Source: Rick Wright -
lessons.tradingacademy.com