Risk Management

The risk in a trade is governed by three things: the stop price, the size of the leverage, and the amount of funds in the open position.

In all transactions, our standard risk (R) from the deposit is 1%. Based on this, we prescribe STOP LOSS and PERCENTAGE OF DEPOSIT in each transaction.

HOWEVER, if you are already experienced and want to enter a trade with a risk of 2% or 3%, then below we will tell you how to calculate the required deposit percentage to enter a trade. Only change your R when you get experience.

The goal is to keep the risk on each trade fixed.

It is impossible for the risk in one transaction to be, for example, 1% of the deposit, and in another transaction 5% of the deposit.

It has been mathematically proven that with 30% of successful transactions with risk management of 1 to 3, your deposit will be in profit.

Our recommendation: always take a risk per trade of 1% on your deposit. Then if you have 7 losing trades you will affect only 7% of your deposit. And you can make a profit of at least 8% on the remaining 3 trades.

What does risk to profit 1:3 mean?

Let’s take, for example, buying a coin for $1.

Let's set a stop loss at $0.9. What is the risk of being stopped in this trade? Exactly 10%.

In order for the 1:3 condition to be met in this deal, we need to earn 30%. That is, set a take profit of $1.3. Provided that technically this is actually achievable on the chart (And without this condition, we would not enter into the transaction).

Risk of loss - 10%.

Potential profit - 30%.

We get risk to profit - 1:3.

Let's calculate the required percentage of the deposit using the example of a transaction from the channel.

Input data:

• Let's say our deposit is $100,000.
• We chose for ourselves that we want a risk of 1% of the deposit in each transaction.

The following deal comes up:

What do we see in the deal?

• We could potentially lose 2% of the entry amount.
  We can earn +6% to the entry amount.
• Trade with risk to profit 1:3.

How to do the calculation:

The trade stop is -2%.

-2% of $100,000 = -$2000.

If you enter the entire deposit without leverage and enter a stop loss, the minus will be equal to -2% of the deposit (-$2000).

And it should be -1% (-$1000).

This means that you need to take the amount of funds to enter 2 times less than 100%.

Or 100%/2 = 50% of your deposit. That is $50,000.

You can take this 50% with 1X leverage (essentially no leverage) and then your own funds in the transaction will be 50%.

Or with an isolated 10X. Then the equity in the transaction will be 5% (5% * 10 = 50%). That is, $5,000 of own funds.

Do you want a 2% risk?

When calculating the percentage of the deposit, add *2 to the formula.

It will turn out:

100%/2*2 = 100% of the deposit. That is $100,000.

This is because in this example the stop is only -2%. And if we enter the full amount, then the default risk will be -2%.

How to choose leverage?

1. The leverage must be ISOLATED, otherwise there is a huge risk of losing the entire deposit in one transaction.
2. The size of the leverage affects only the liquidation price and has absolutely no effect on the profit/loss of the transaction, because your loss is fixed: 1-3% of the deposit of your choice.
3. It is IMPORTANT to take such leverage that the liquidation price is further than the stop price.
4. If point No. 3 is observed, then the difference in the amount of leverage remains only in the amount of own funds in securing the transaction:
1. With a leverage of 5X at $1000, $200 will participate ($200*5 =$1000);
2. With 10X leverage at $1000 = $100. ($100*10 = $1000);
3. With leverage 20X = $50 ($50*20=$1000).
4. With leverage 100X = $10 (10$*100=$1000).

When you learn how to calculate volume correctly and quickly, you will be able to use the leverage you want. At the same time, the risk of the transaction will still remain fixed, regardless of the leverage size: 5X, 10X, 50X, 100X.

The information on this resource is addressed to an unlimited circle of persons, and is not an individual recommendation; It is exclusively informational and analytical in nature for our team own use, and should not be considered as a proposal or recommendation for the investment, purchase, sale of any asset, trading operations on financial instruments. It's your own responsibility what usage you will make about it. The views expressed reflect only the author’s exclusively personal view.

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