Risk Management – Outline
What is Risk Management?
Most common Threats.
Different ways to manage the risk.
Which technical indicators are useful for Risk management and how to use them
What is Risk management?
Risk management in Financial market is
All kinds of threats may damage your Capital or reduce your potential income. Managing the risk is not just about you to control you lose and save your capital, it is also about how to manage your positions which are in profit and get more benefit out of them.
In risk management, two factors are very important, Psychological and Technical methods. In this webinar, we will learn how to use technical methods to have more control over our capital.
Risk Management – Identify Threats
To eliminate threats, they must be found!
The first step in solving any kind of threats or problems is to know potential threats and find them. Most potential threats for your capital in Financial markets:
Wrong Entry time!
Wrong lot size.
Wrong Exit time.
Now lets to see how technical indicators can help us to control and solve them.
Risk Management – Best time to enter
Trend is your friend!
Never trade against of trend. That's the most common mistake of losers! Pertinacity is the wrong habit that most losers have it. They always say that, oh, that's the time that market will change the direction, and doing the same mistake over and over. Before entering the market, make sure you found the trend and for that matter try to find the trend. There are indicators in your Meta trade which can help you for that, like SMA (Simple Moving average) and MACD (Moving Average Convergence / Divergence). There are Videos about them on our website and you can find out how exactly you have to use them.
Risk Management – Correct Lot size
We do not Gamble Here!
Another common mistake, especially between new traders is to choose the wrong Lot size for their positions. Remember you can not be a millionaire in one night. This business as all other kinds of businesses can make you reach, but not in one night/day. If you are looking to get reach in one day, make sure you are in Casino (If it can help you!!!). Trading is a business, it is a science and works perfectly if you are in the right way. The market always has down and up movements, so make sure your lot size can keep your positions alive and not to close them even before your SL. It will never become true to make 5000 boxes with just $500 in one position, unless if you do gamble, which is not the aim of trading! But if you trade correctly, make sure you can make not just 5000, even $5,000,000. For Leverage of 1:100, there are some examples:
$500 >> Currencies / Gold / Silver >> Maximum lot size: 0.05 - Oil >> Maximum lot size 1.00
$1,000 >> Currencies / Gold / Silver >> Maximum lot size: 0.10 - Oil >> Maximum lot size: 2.00
$5,000 >> Currencies / Gold / Silver >> Maximum lot size: 0.50 - Oil >> Maximum lot size: 5.00
And so on… (Photo below)
To Run, need to Walk, first!
Leverage in the financial market comes from the word of Lever. In the very easy description it is kind of credit opportunity, which is not coming as capital into your account, but allow you to multiply your Profit / Lose. For example, if you have the leverage of 1:1 it means by changing the $1 of the price of the symbol which you are trading, your profit also will be a change in the same size, but if your leverage is 1:100, then you profit or lose also will be multiplied by 100! It can be an amazing opportunity just if to know how and when to use. If you are beginner, make sure your leverage is not more than 1:30 or maximum 1:50. By getting more experience you can try the bigger leverage first in demo accounts to feel and realize how it works exactly and for your trading symbol how does it effect by different lot sizes, they can try that in real account. What we can suggest you:
Beginner > Leverage 1:30
Intermediate > Leverage 1:100
Expert > Leverage 1:200
Professionals > Leverage 1:200 - 1:400
Risk Management – SL & TP
Doubt Kills Everything!
Make a plan before taking any action and when your plan is done, follow the rules! Nothing less and nothing more. Especially about SL. 80% of loser traders do not use SL and 20% of them (Which they may not loser, but do not have a reasonable profit as well) do not have exit policy or any plan for TP point.
Oh, no, I am minus $100, I will lose if I close the position now, let's wait, the price will be back at least there, where it started to move up / down. And this is where exactly you gonna lose your account soon. So, how we can solve it.
- Find support and resistance levels + important points, where usually price changed in H1 and H4 time frames. and use them as SL and TP points, based on your trading strategy.
- Use trailing Stop by using Parabolic SAR.