Setting up a capital management and risk control strategy is really not difficult. In fact, what you can easily do more than trade is preserve your capital. But often, people don't like it, so it becomes too difficult and most traders fail in a seemingly simple job - following a proper capital management strategy.

The essence of a capital management strategy is to monitor it closely.

If you do not have a plan to control your risk, sooner or later, your account will be blown away or melted due to the "hot" market.

Likewise, even if you own a trading strategy worth a few thousand dollars, it is impossible for your account to avoid market erosion without a capital control plan.

By the time you have read this article, you will know how to risk your trades, how to plan each entry and limit yourself, right and enough, and ultimately ensure. for your account that persists for a long time.


How many risks can you take, or in other words, how much do you lose without fear?

This is a question worth $ 1 million. If you can answer this question honestly and combine it with your trading system's superiority, you are half a step towards success.

Sounds pretty, right? But it is the truth. One of the biggest reasons most traders lose is that they risk too much. Traders just like to calculate how to eat as much as possible so they think about it first, while determining how much to lose is the first thing to say.

Granted, you risk only 1% or 2% of your account per trade, but not a complete capital management strategy.

If you define the risk by such a percentage, it will not allow your brain to accept the amount at risk. Sure, 2% sounds reasonable, but why do you think it equals $ 1,000. (That is your starting capital is $ 50,000 and you risk 2%). Are you risking $ 1,000 per position?

What we do?

Let's say now you have inherited $ 100,000 and decide to put a tenth in your account and trade. You have been trading for a few years and have finally been steadily profitable for the past 6 months.

In the past your account was only $ 10,000, now it's up to $ 60,000. You put your risk ratio at 2%, on a $ 10,000 account it's just $ 200 per trade. Now, it's no less than $ 1,200!

However, you can argue that wanting to raise $ 60,000 is also a period of incremental increase, so when you reach the number of $ 1,200 risk is not scary.

But perhaps, there is a reason that very few professional traders use the traditional 2% rule. That's because they no longer need to sacrifice as much risk to make high profits as small traders. They also understand that it does not reflect a real risk picture.

Determine your current level, your current mentality, your current financial capacity, how much risk you can take (which is not frightening you. collapse, stress). That is, we must use both the percentage and the value of that currency to determine our tolerance to risk.

This step is very important, as it will help you not only balance the account but also balance the trading sentiment (the two most important factors are guaranteed).


The phrase "Plan Your Trade and Trade Your Plan" is probably not too unfamiliar to traders. But how to elaborate on a capital management plan. Please take a look.

Your capital management plan doesn't have to be complicated. Simply writing down your exit strategy is enough.

The exit strategy requires to stop loss and take profit. If you have an exit strategy based on two techniques Scaling in and Scaling out, it is necessary to write down specifically which points will enter and order.

A simple plan would look like this:


You have set your risk parameters and have a plan to "attack". Now is the time to set a "pain threshold".

What is the pain threshold? It is defined as the maximum you can endure after a series of losses. Accounts over this threshold will cause you to panic, dismay, and not be wise to continue trading.

For example, you lose 4 orders continuously, each order you risk 2%, so in total, you lose 8% of your account. This leads to you doubting yourself and is a factor that makes you lose more money. In the end, you stay in a vicious circle: loss - mental breakdown - heavier loss.

Let's say at this point your pain threshold is 10%. That means when you lose 10% of your account, you have to leave the computer screen and rest. This 10% will be calculated from the top score, not your current account. For example. You have been doing well lately, your accounts go up to $ 12,500 and the 10% pain threshold is equivalent to $ 11,250.

Rest a few days, a few weeks, or whatever, it's up to you, as long as you come back, your mentality is no longer panicking like at first.

This pain threshold differs depending on the personality of the trader. The threshold of acceptance is between 5% - 10%. This threshold allows you to lose money continuously without making you feel tired and ensuring the security of your capital account.

This is a 3-step sequence in a simple capital management strategy. Traders can use it in conjunction with the system we are trading with. Apply it and feel the difference.

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