Winning Strategy (Secret of Success Through Money/Risk management)
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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. #2
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    i agree with you that most loss come from trading with big risk and mot losers do not trade with money management and o they get big loses or margin call at the end, the trader should know that with money management he will survive in the market and will make consistent profits always and so he will make more money than he can expect

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  3. #3
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    You nailed it in a better points and am sure any newbie who goes through this have to see why it's important to have a good money management. Even when you have a 50 percent wining formula, good money management with a good risk reward ratio will still keep you in this market. Success is something that does not come up easily and surely we should understand the necessity to build our trade and make sure we establish on the avenues to become successful.

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    Quote Originally Posted by Tonycee View Post
    You nailed it in a better points and am sure any newbie who goes through this have to see why it's important to have a good money management. Even when you have a 50 percent wining formula, good money management with a good risk reward ratio will still keep you in this market. Success is something that does not come up easily and surely we should understand the necessity to build our trade and make sure we establish on the avenues to become successful.
    The points are good and valid, but then to start with, all these works when the trader has got a working trading strategy, because it is not easy having a winning strategy of 50 percent let alone 75 percent. So, I assume this has to be the step a trader applies when they have got a winning strategy which means they should as well be highly disciplined.

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    This is apt and I know that it seems all simple but the implementing of it will be little hard. Well, I have a different means of winning strategy and I like to make it more simple for me. I don't go trading with the use of complex calculation. Okay, here is mine. Just risk 2-3 percent on each trades and aim for 2x or 3x of the risk I took. That is how I see I can have my successful trades.

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  6. #6
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    Quote Originally Posted by Brain View Post
    The points are good and valid, but then to start with, all these works when the trader has got a working trading strategy, because it is not easy having a winning strategy of 50 percent let alone 75 percent. So, I assume this has to be the step a trader applies when they have got a winning strategy which means they should as well be highly disciplined.
    Hello friend, my explanation was for 75% winning in particular, but it might vary, because the trading strategies of traders are not the same thing. With a good risk management, if you have 50% winning, you will still be in profits. So, just make sure you match your winning percentage with your risk management for effective earning in the market.

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  7. #7
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    Quote Originally Posted by ajagbeolegba View Post
    Hello friend, my explanation was for 75% winning in particular, but it might vary, because the trading strategies of traders are not the same thing. With a good risk management, if you have 50% winning, you will still be in profits. So, just make sure you match your winning percentage with your risk management for effective earning in the market.
    In the case where a trader will be able to stay winning even at getting 50 percent winning strategy is when the trader has been able to have more than 1:1 risk and reward, but when the trader gets less then it will be a hard thing trying to win with such rate. I am learning on 1:1 and it seem interesting, I will try applying this method later.

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  8. #8
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    However i sincerely agree with you, majority of traders are losers in forex market for the fact that they are trading with lack of risk management and money management in this market, no matter how good your strategy or trading system may be as long as there is no proper management, in that case it will be hard for you to succeed with such trading strategy or system. Good management skills is essential for all traders to succeed.

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  9. #9
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    I must say once more, if we want to stay winning most of the times in the market then we need to take time to work more on how we trade and then make sure to attain a good trading strategy, that is the first thing any one should do first before they get into such strict money and risk management. However it is a good one and demands some real good discipline.

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  10. #10
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    Honestly you are right, traders have 75% of winning strategy yet they lose their money in forex market, the secret is lack of money and risk management in forex market, I have come to realize that for me to maintain any good trading strategy or system then I need a good money and risk management to do that, if not the strategy will be useless.

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