Account and Risk management
If you have no money left, you cannot trade. Defending your account is peak importance.
How much (% of total account) do you place on a single trade?
Discussion
I’m high risk. I put 5% of my account. Got 100 USD to trade with? That’s 5USD on the trade. 1% is considered safe. 2% is aggressive.
Do I want to lose all my 5%? No I have a stop that let’s me exit with a 3% loss. That’s a lot. But my RR and strike rate allow for it. It all comes down to APPT, or average profit per trade.
With a RR (Risk Reward ratio) of around 4 I enter a trade. What does it mean? That my take profit needs to be 4 times my stop. If my stop makes me lose 3% I want my TP at around 12%. Of course some days it will be more. Some days I’ll exit sooner and it will be less.
Does this mean I need a 12% move? No, there is leverage to speed things up.