Money and risk management are critical components of any successful trading plan. They involve carefully considering the amount of capital one is willing to risk on each trade, as well as how much loss one can tolerate within a given period, usually a week or a month. Having a sound money and risk management plan can help traders avoid substantial losses and maintain profitability in the long term.
EVERY TRADER SHOULD KNOW THIS
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Plan A with RR of 3:1
Parameters:
- Risk per trade: 1% of the account
- Maximum weekly loss: 70% (equivalent to 7 losing trades)
- Target weekly profit: 1:3 RR (equivalent to 2% profit)
- Average winning trades required: 30%
- Stop loss: 20 pips
- Take profit: 60 pips
Trading Plan:
- Maximum 2 trades per day
- Weekly limit of 10 trades
- Stick to the weekly loss limit of 7 losing trades
- A patient and systematic approach, no forcing trades to meet the weekly target
Plan B with RR of 2:1
Parameters:
- Risk per trade: 1% of the account
- Maximum weekly loss: 50% (equivalent to 5 losing trades)
- Target weekly profit: 1:2 RR (equivalent to 5% profit)
- Average winning trades required: 50%
- Stop loss: 30 pips
- Take profit: 60 pips
Trading Plan:
- Maximum 2 trades per day
- Weekly limit of 10 trades
- Stick to the weekly loss limit of 5 losing trades
- A patient and systematic approach, no forcing trades to meet the weekly target
We recommend Plan B as it has a lower maximum weekly loss and requires a higher average winning trades percentage to achieve the target weekly profit. However, both plans have their own advantages and disadvantages, so it's up to the trader to choose which plan suits their trading style and risk tolerance.
Traders who need assistance in calculating lot size, stop loss, and take profit can use an EA that automatically calculates these parameters based on their account balance and risk per trade. We offer this EA for free, and traders can contact us on Telegram @MrCoolFx to receive it.
Remember, trading is a long-term game, and losses are inevitable. The key to success is to remain patient and disciplined, and to follow a well-defined money and risk management plan.
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