Today I made ​​a light topic to discuss, about trade using a stop loss or cut loss. We have too much discussion about the importance of stop loss and risk management, it is 100% true, we must agree that the stop loss and risk management is essential to minimize the risk.

Do you agree with this...

No Stop Loss = No Risk Management?

It is a simple and easy question to answer, maybe we will find many traders who agree with the above sentence.

But ...., should not be so, money management is not only for the balance in the account, but for all of our capital, (on the account, in payment processor, in the Bank, or in your pocket, and others). At its core is the management of all of your capital.

I've been trading with risking 100% of deposits, but I have a risk management, yes of course.

Suppose I have a $ 1,000 capital.
I have a trade plan with a maximum risk of 10% (of the total capital) per trade. That means I take $ 100 risk for each trade position.

Well, in general, we will use this way ....
We made ​​a $ 1,000 deposit. We use a stop loss or cut losses when equity was reduced by $ 100 or 10%. It is a common way. And other people will think that we are really good in applying risk management. Of course...

So what if we do this way ...
We split our capital into 10 deposit @ $100. We made ​​a $ 100 deposit, the remainder ($ 900) is stored in the payment processor, or bank, or our pockets. And we do the trade without a stop loss / cut loss. If we get stopped out, then we make a new deposit ($ 100), and so on.
Perhaps some people may believe we are risking 100%, yes we understand them, because they only see from the management of deposits, not capital management.

Conclusion: Do not think that risking 100% deposit is mean without risk management. So if you see me getting stop out (usually I trade without a stop loss), you do not think that I am risking 100% of capital. I am only risking 100% of deposits. This could mean only risking 10% of my capital, or 5% capital, because I always split the deposits into multiple parts.

Another example:
Suppose I have $ 1,000. and I split into 10 deposits @ $ 100. Well, if I set 10% risk (of the initial balance) per trade. Or $ 10 per trade. This means that we set 1% risk (of total capital) per trade. Equivalent to $ 10.
10% risk of initial balance ($ 100) = 10% * $ 100 = $ 10. This is if we calculate in deposit management.
1% risk of total capital ($ 1,000) = 1% * $ 1,000 = $ 10. This is if we calculate in capital management.

It is a simple way to understand capital management, maybe I'll make a topic about cash flow management in the other thread. I think we should actually do forex trading as a professional business, not just about market analysis.