Sorry, I didn't understand the phrase "Everyone has a certain "master card". Is it slang or something like this?
The Recipe to Reduce the Risk.
- Thread starter Jamie J.
- Start date
It's very simple, everyone has their own strategy and thoughtful approach. And control of emotion is only a component of this system.
It is recommended that each trade uses no more than 2% of investable capital. This ensures that a serious of bad trades do not wipe out the capital base. Risk management is about ensuring you do not go broke. By keeping each trade to just 2% of capital, an account would need to lose 50 times (excluding broke execution fees) to lose everything. An even more cautious approach is to take 2% of the remaining capital and trade that. This reduces the capital sum deployed for each trade, but ensures that an account would never run down to zero.
Oh, I got it, thank you very much! I agree with youIt's very simple, everyone has their own strategy and thoughtful approach. And control of emotion is only a component of this system.
I asked another poster in another thread this question: If you are a novice starting out and only have $1K capital, if each trade you risk only 1-2%, you are talking about $10-$20 each trade. What can you buy for $10 and with most novice, commission is ~$5 - $10. How do you make money? Do you have any suggestions?
Thanks.
We are talking about how to reduce risk. What you should do is to look at the immediate key level of support or resistance that will dictate your stop loss or take profit targets, then calculate the number of pips it will take your trade to get from opening price to either the stop loss (risk) or the take profit area (reward).
Reducing risk also involves increasing gains by layering into winners and minimizing trading frequency. The basic concept is when you lose it is $1 for every $2 or more you make on winning trades - do that and you can have a low win rate and still have real good years. You have to have have the appropriate capital to trade with any decent risk mgmt. Being under capitalized, over leveraged, and trading to often is what dooms most novice traders.