How I manage risks?
We all know that trading is a game of probability, we cannot have a 100% winning rate.
=> Therefore, it will be better when we have a strict way of managing capital.
This is the way I often use when managing my capital.
I manage according to the Risk/Reward ratio. There are many theories about this method on Google, you can find and read through. Here I'm just talking about how simply I apply it.
I mainly trade futures. For each order I will use 10% of my capital. And my maximum stop loss ratio is 30% (20% for high risk orders). If applied like this, if that order loses, I only lose 3% of my total capital. If I win I usually take 3R.
For example:
In total, I still made a profit of 10R. 50% win rate is quite low but still win 10R.
That is the power of capital management!!
Enjoy!!
DYOR
=> Therefore, it will be better when we have a strict way of managing capital.
This is the way I often use when managing my capital.
I manage according to the Risk/Reward ratio. There are many theories about this method on Google, you can find and read through. Here I'm just talking about how simply I apply it.
I mainly trade futures. For each order I will use 10% of my capital. And my maximum stop loss ratio is 30% (20% for high risk orders). If applied like this, if that order loses, I only lose 3% of my total capital. If I win I usually take 3R.
For example:
- The win rate is 50% (pretty low)
- Place 10 orders
- Win 5 orders: 3R * 5 = 15R
- Lose 5 orders: 1R * 5 = 5R
=> Profit: 15R - 5R = 10R
In total, I still made a profit of 10R. 50% win rate is quite low but still win 10R.
That is the power of capital management!!
Enjoy!!
DYOR
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