riskreward

Risk management is not just a safety net; it is the specific system used to control losses and protect your trading capital. Without a strict risk plan, even a highly profitable strategy will eventually fail. A few bad trades should never have the power to wipe out your account.

WHY IT IS CRUCIAL

Markets are inherently unpredictable. No matter how good the analysis is, probabilities dictate that losses will occur. Risk management:

1. Protects against emotional trading (fear and greed).
2. Ensures long-term survival so you can stay in the game long enough to be profitable.
3. Stabilizes your equity curve, avoiding massive drawdowns.

OUR CORE RISK RULES

1. PER TRADE RISK LIMIT
Never risk more than 0.7% to 2% of your total account balance on a single trade. This ensures that a losing streak does not destroy your capital.

Example:
If you have a $10,000 account, your maximum risk per trade should be between $70 and $200.

2. DAILY LOSS LIMIT
Do not open too many positions simultaneously. You must have a hard stop for the day. Your total daily loss limit should be a maximum of 15% of your portfolio. If you hit this limit, stop trading immediately for the day to prevent emotional revenge trading.

KEY TOOLS FOR RISK CONTROL

Use a Risk Calculator to automate your position sizing. Do not guess your lot size.

Stop Loss (SL): An order that automatically exits a losing trade at a specific price. This is your insurance policy. Never trade without it.

Take Profit (TP): An order that locks in gains at predefined levels.

Risk-to-Reward Ratio (RRR):

Always aim for 1:2 or better. This means if you are risking 50 pips/5%, your target should be at least 100 pips/10%. With a 1:2 ratio, you can be wrong 50% of the time and still be profitable.

ADVANCED TACTIC: MOVING STOP-LOSS TO ENTRY (BREAK-EVEN)

Moving the Stop-Loss to the Entry price is a technique used to eliminate risk exposure in an active trade. It involves adjusting your stop loss level to the exact price where you entered the market.

Why do this?

If the trade reverses against you after moving to entry, you lose $0. You have eliminated the risk while keeping the potential for profit open.

ADVANCED TACTIC: CLOSING PART OF A TRADE (PARTIALS)

You do not have to close 100% of a trade at once. Closing a portion (partial closing) is vital for managing psychology and banking revenue.

By taking profits on 50% or 75% of a position, you lock in gains immediately. You can then leave the remaining portion of the trade running to catch a larger trend with zero stress, as you have already banked profit.

COMING UP NEXT
In the next article, we will be diving into Types of Traders & Their Risk Management Styles

Disclaimer: This content is for educational purposes only and does not constitute financial advice. Trading involves significant risk.
- Tuffy (Team Mubite)

#RiskManagement #CapitalProtection #TradingSurvival #RiskReward

Day 20 is dedicated to the most crucial aspect of trading: Risk Management. No matter how good your strategy is, you cannot profit consistently in the long run without mastering the Risk/Reward (R/R) Ratio.
​The R/R Ratio measures the relationship between the money you risk and the profit you aim to make on a single trade.
​📐 Calculating the Risk/Reward (R/R) Ratio
​There are three main steps to calculate your R/R Ratio:
​Step 1: Define Your Risk (R)
​Risk (R) = Entry Price - Stop-Loss Price​Example: If you buy at $15.00 and place your Stop-Loss at $14.50, your Risk (R) is $0.50.
​Step 2: Define Your Reward (R)
​Reward (R) = Take Profit Price - Entry Price​Example: If you buy at $15.00 and place your Take Profit at $17.00, your Reward (R) is $2.00.
​Step 3: Calculate the R/R Ratio
​R/R Ratio = Reward / Risk​Calculation: $2.00 / $0.50 = 4.0​Meaning: This trade is 1:4. This means you are aiming to make $4 for every $1 you risk.​The Golden Rule: You should only enter trades with an R/R Ratio of 1:2 or higher. A lower R/R ratio means your probability of winning must be unrealistically high to make money.​💡 Calculating Trade Size Using R/​Professional traders follow the 1% to 2% Rule, risking only 1% to 2% of their total portfolio capital per trade. (E.g., If your portfolio is $10,000, you only risk $100 or $200).​Capital Risk (Dollar Amount): 1% of $10,000 = $100​Price Risk: $0.50 (From Step 1)​Trade Size (Number of Coins to Buy): Capital Risk / Price Risk​Calculation: $100 / $0.50 = 200 Coins​Result: If your Stop-Loss hits, you lose exactly $100. If your Take Profit hits, you gain $2.00 x 200 = $400, achieving that 1:4 ratio.​Critical Tip: Your Stop-Loss is the key determinant of your R/R Ratio. Ensure it is placed at a technically sound location (e.g., just below a major Support Level) and not just based on where you want to risk $100.​Question: What is the minimum acceptable R/R Ratio you allow yourself to trade with (e.g., 1:2, 1:3, 1:4), and why? Share your risk discipline in the comments!#RiskManagement #RiskReward #TradeSize #CryptoEducation💡🚀 $ZEC $INJ