In fact, usually the price often does not reach the target, resulting in small losses. And that’s even when you take the profit on the target. The risk 1 to reward 1 entry is 1R with a 50% win rate, and the result become break even. Under this condition, even if the price action is simmering in the middle and comes back before it hits the target, it should be about risk 1: reward 1 trade. In this case, if the winning rate is 50%, it will be 2R and you will surely have a profit. Suppose you create a rule that you enter only where you can secure Risk 1 vs.
Risk / reward concept for small loss, big profit trades If it becomes over 1R, profit will surely remain even if the winning percentage is 50%. It is quite difficult to raise the winning rate, but the R multiple can be controlled depending on the entry method. If you have not reached 1R now, it will be urgent to achieve it first. R multiple = average profit (in pips) ÷ average loss (in pips) PFįirst, aim for Winning rate = 0.5, PF = 1, R multiple = 1 becomes ± 0 (break even result ). PF (Profit Factor ) = Total profit (in Pips) ÷ Total loss (in Pips) If PF is 1, that’s break even. Winning rate = number of win trades ÷ total number of trades It’s huge, isn’t it? Three numbers to protect your precious account When 1.0 pip of spread per entry occurs, that means a total of 200 pips will disappear just for spread regardless of the outcome. For example, if you trade 10 times in a day in average, you will have a total of 200 entries a month. If you trade many times within a day, like scalping, wide spread can be a great obstacle. So to keep trading without mental collapse, do not take unreasonable positions. There is a theory called Prospect Theory, but people tend to take profit quicker than cutting loss.
The only way not to run out and and secure your money is to adjust the position size (open position ) according to the amount of your account size. Loss is not simply determined by how many pips you lost, but is calculated from your account size and average loss pips.Īverage loss = Total loss (in pips) ÷ Number of lost trades (Average loss is in pips)Īssuming your average loss is 10 pips, look at a table below. If you are a beginner, make it 1% of your available balance. Loss of one trade should be up to 2% of your account balance. Trade in the correct position size that the bullet is not exhausted Technical tools can not let you win 100% no matter how much you study, but if you follow the rules of money and profit management, the worst situation of leaving the game can be avoided. Unlike technical management, knowledge on profit management can be used forever once it is remembered, so I really recommend you to take this opportunity to learn it. Attack with a technical sword and protect with a profit management shieldĮveryone is conscious only to win, but equally important is to save money. However, you will have plenty of time to study without reducing your money if you have well-managed account. In order not to be like that, it is necessary to avoid reducing the money in extreme way.Īs a beginner’s mindset, it is good to think “I’m studying for myself with some expenses” for your loss. But in forex, when your account is exhausted, you will have no choice other than giving up even though you wish to continue. The same can be said for business and study. Nothing is more important than NOT GIVING UP.
PIP CALCULATOR EXCEL HOW TO
If you know how to survive without leaving, even if it takes time to learn, you will be able to join the winning traders group. It is said that 70% of the FX participants will eventually leave, but only those who survive to the end will receive continuous benefits. A competitive trade is a surviving trade.