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Thread: Winning Strategy (Secret of Success Through Money/Risk management)

  1. #1
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    Winning Strategy (Secret of Success Through Money/Risk management)

    I have being wondering within myself the main reason why traders are losing too much money in the market, and all that comes to my mind is the fact that traders are not engaging in the proper money and risk management when they trade the market. The market is so risky, it is not a place we should be gambling our money, it is the seriousness of traders that will help them to be successful. The issue with most traders is never the lack of the good trading strategies that most traders are insinuating upon, because if you asked a fellow trader the strategy he or she is using, they will tell you that it is strategy A or B or C etc..., and when you check that strategy, you will realize that it is such a strategy that is working with more than 75%. Now tell me, what else does any traders need as strategy when they already have 75% winning strategy, but yet they are losing? So, money and risk management has to be well calculated and monitored if traders will want to be successful.


    Analysis and Calculations: Let us assume that a trader has a winning strategy of 75% and a capital of $500. And the trader is using money and risk management of 10% and 1:2 respectively. Also, let us assume that the trader equally use stop loss of 50 pips and take profit of 100 pips. However, when the trader makes 20 different trades, then the follow calculation below applies:

    Number of trades: 20 trades

    Percent of winning strategy: 75%

    Number of winning trades: 15 trades

    Number of losing trades: 5 trades

    Money management: 10% {The trader will risk only $50 per trade}

    Risk management: 1:2

    Pips value for winning: 15 trades x 100 pips for winning x 2 for reward = 3000 pips

    Pips value for Losing: 5 trades x 50 pips for losing x 1 for risk taking = 250 pips

    Total profit = 3000 pips for winning - 250 pips for losing = 2500 pips.



    Can you imagine this big value (2500 pips) of profits with just a simple calculation and 75% winning? This is to show the extent at which traders are missing when they are pursuing the best strategies all round, whereas it is the money and risk management they supposed to focus upon. I put this together for traders to have their eyes opened and outsmarts the market with this simple calculation.

    However, emotion is another cause of failure, just make sure that you do not allow emotion in your trading. Be serious and be disciplined, and before you know it, emotion will vanish away. Because, if you allowed emotions, all this plans i explained above will not be used accurately by you, and you will still be losing in the market.

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  2. #11
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    Sir, your write up is very thought provoking because it is full of so many great factors and truth about the forex market especially for traders who will like to move on in this business without making too much loss. It is very true that many of us do have some fantastic trading systems such as we do not have any reason to lose money in large quantity to the market , but alas! what do we have at the end of the day, it is one loss or the other. The simple truth like you have rightly pointed out is that no matter how wonderful a trading system is, if it lack good money and risk management which to me are the most important trading rules, here, loss will never seize to come our way.Forex is not just about trading strategy but in been strict about risk and money management.

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  3. #12
    Trader cutiekc's Avatar
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    If we want to win and keep on doing that in forex trading market then we should be able to be discipline. This method that has been explained here is something that traders can get doing depending on how much disciplined and patient they are with the market. In the sense that some one trying to make fast money from the market will have this all done wrongly.

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  4. #13
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    Quote Originally Posted by cutiekc View Post
    If we want to win and keep on doing that in forex trading market then we should be able to be discipline. This method that has been explained here is something that traders can get doing depending on how much disciplined and patient they are with the market. In the sense that some one trying to make fast money from the market will have this all done wrongly.
    Money and risk management is the basic. I think it should be more taught in forex trading than the way traders are been taught on how to trade because we don't need much on how to trade, but we need much on how to make sure that we are trading with the needed approach. Using risk management will determine how much we will make and how far we can sustain our account.

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  5. #14
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    Though you would have to get to have a strong trading strategy before you actually get to have a good successful means of trading. In forex trading, you can become successful depending on your trading experience and knowledge then using the risk management is a different way of protecting your trading account.

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  6. #15
    Trader Lyon's Avatar
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    We can win and become successful in the business. It is not simple though to get to make money from the market. You will need to have a strong trading strategy before you can succeed the business. Therefore learning is the most important thing. Then knowing your strategy and concept of trading before being much bothered about money and risk management. Just what I do.

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  7. #16
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    We can succeed in the market, the best thing needed to be done in the market is understanding. Now, this money management concept is the real deal, I keep seeing new and new method of increasing our profitability in the market, however, it now depends on the discipline a trader has to make this trading money management quite effective.

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  8. #17
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    Quote Originally Posted by Darkhorse View Post
    We can succeed in the market, the best thing needed to be done in the market is understanding. Now, this money management concept is the real deal, I keep seeing new and new method of increasing our profitability in the market, however, it now depends on the discipline a trader has to make this trading money management quite effective.
    If we are focus on our learning then we can understand this market movement easily. If we are know about the candlestick patterns then we will understand easily this market. This thing is make our winning ratio high on this business. Our success and high earning is only possible when we have good trading skills and trade without mistakes on this market.

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  9. #18
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    According to me Risk management can help us to me huge loss in forex market. 95% traders are loser in forex market. But I think we should not disappointed. So i can tell that winning strategy is a good strategy for make good trade and profit. I like winning strategy in forex.

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  10. #19
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    Quote Originally Posted by bosskh09 View Post
    According to me Risk management can help us to me huge loss in forex market. 95% traders are loser in forex market. But I think we should not disappointed. So i can tell that winning strategy is a good strategy for make good trade and profit. I like winning strategy in forex.
    You are making a point my friend, the risk management is the protective calculation that will help traders to overcome the losing times in the market. It is true that 95% or more are losing in the market, but those traders that can trade with good trading strategy and risk management will ever be exempted among the losers in the market.

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  11. #20
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    A good planning and money management is always helpful for traders and they can make easily good profit to follow that trading way. if you are follow a trading strategy after the confirmation of that strategy on demo trading account then it is very simple and easy for us to trade and make money on our real trading account.

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