Risk Management Mindset

[Charles-Tim]

[But we do not have the right to judge someone's opinion, instead, let's learn to respect the opinion of others, because we do not have the same experience, strategy, and understanding of risk management, In addition to this, obviously what I did was just an illustration or example only, I did not say that any trader should put in $1000 when he does his actual trade activity. The $1000 margin its just an example it could be $100, $10 and etc. It depends on the capacity of traders, so when you say that it is misleading, where was I misleading?

Maybe you just think that your opinion is right, so you are judging my opinion here, I respect your opinion sir, but I hope you will also learn to respect the opinions of others, not to judge just to show that your opinion is right. We are all entitled to give our opinions here and there is nothing wrong with what each of us gives here because we do not all have the same understanding of trading matters.

So because I posted that something is misleading, than means I disrespected you? If you meant something else, you can post about it, that this is what you want to say, or you can give a better explanation.

Do not forget this is trading discussion and we have newbies here. Trading is very risky, which is the reason we need to give an advise that can minimize losses in a way profit will still be achievable.

[BitBakerr1]

I totally do not agree with the 1:2 RR; that is an unreasonable risk to be taking. That is, you are risking so much for so little.

The lowest for me should be a 1:3 RR; anything lower than that is not worth it.  

Can you explain what you mean as 1:3 RR? That means you will risk $1000 to trade and be expecting $3000 interest on it?

No, I believe the OP was using the $1000 to $2000 as an example to say you should always expect double what you are risking.

I am saying a better risk should be 1:3 RR.

It is surely bad trading to be risking $1000 on a trade if that is all your capital, even if your capital is slightly higher than $1000. If you have a high risk appetite to be risking such an amount, your trading capital has to be huge. If you have a high risk appetite with small trading capital, your account will be liquidated quickly.

You trade with a margin as high as $1000 doesn't mean that you are risking everything in that trade, because you can be willing to lose only $100 dollar from that $1000, by placing your stop loss at $100 dollar, but the key reason why you will see a trader using $1000 to trade instead of that $100 is because it's more better to trade with such a high margin, than trading with only the $100 but with 10x leverage that increases your chances of liquidation.
So if a trader is talking about risk to reward ratio, he is talking about the amount he is willing to lose, not his entire margin.

You got it right, this was exactly what the OP meant I believe so, because you can’t tell me a trader will be willing to risk all the money he has at the same time, using all the $1000 the trader can just but his stop loss at $100 or $200 what ever amount he wish to lose but not all the $1000.
But the OP should have explained it better for everyone so people will understand what his saying, we have newbies here so they won’t be misled.
Trading is very risky and people should learn to always play safe, not every trading strategy you see you should use.

[Rruchi man]

No, I believe the OP was using the $1000 to $2000 as an example to say you should always expect double what you are risking.

I am saying a better risk should be 1:3 RR.

It is surely bad trading to be risking $1000 on a trade if that is all your capital, even if your capital is slightly higher than $1000. If you have a high risk appetite to be risking such an amount, your trading capital has to be huge. If you have a high risk appetite with small trading capital, your account will be liquidated quickly.

You trade with a margin as high as $1000 doesn't mean that you are risking everything in that trade, because you can be willing to lose only $100 dollar from that $1000, by placing your stop loss at $100 dollar, but the key reason why you will see a trader using $1000 to trade instead of that $100 is because it's more better to trade with such a high margin, than trading with only the $100 but with 10x leverage that increases your chances of liquidation.
So if a trader is talking about risk to reward ratio, he is talking about the amount he is willing to lose, not his entire margin.

That means the OP is only misleading people into what is very wrong, he supposed to explain better.

But we do not have the right to judge someone's opinion, instead, let's learn to respect the opinion of others, because we do not have the same experience, strategy, and understanding of risk management, In addition to this, obviously what I did was just an illustration or example only, I did not say that any trader should put in $1000 when he does his actual trade activity. The $1000 margin its just an example it could be $100, $10 and etc. It depends on the capacity of traders, so when you say that it is misleading, where was I misleading?

Maybe you just think that your opinion is right, so you are judging my opinion here, I respect your opinion sir, but I hope you will also learn to respect the opinions of others, not to judge just to show that your opinion is right. We are all entitled to give our opinions here and there is nothing wrong with what each of us gives here because we do not all have the same understanding of trading matters.

Come on, bro, you have to grow a thick skin. Did you not read where he said he should have explained better?

Better expression is very important for discussions as delicate as this so people learn correctly. That is exactly what Charlse is trying to let you know.

[Peanutswar]

When it comes in trading risk management is part of the strategy now if you have only a $1000 and you are just willingly to take a risk which is 10-20% capital this will be considered as a risk management anything that you are already aware with your plan and the possible situation and you know how to react if the strategy is against with your trade still its your plan. This is the reason why its essential to have a TP and SL in your trades now if you think open trades is just enough with your strategy there is no problem but we are just doing a practice of having a proper risk management.

[Zaguru12]

You trade with a margin as high as $1000 doesn't mean that you are risking everything in that trade, because you can be willing to lose only $100 dollar from that $1000, by placing your stop loss at $100 dollar, but the key reason why you will see a trader using $1000 to trade instead of that $100 is because it's more better to trade with such a high margin, than trading with only the $100 but with 10x leverage that increases your chances of liquidation.
So if a trader is talking about risk to reward ratio, he is talking about the amount he is willing to lose, not his entire margin.

If a trader is having $10000 in his trading account and he is risking $1000 to trade, he should still use $10000 for the calculation.

I mean having $10000 but using 1000 to trade, to make other people understand, your calculations should still be based on $10000 for other traders to understand.

I think the explanation needs to be also clear that having $1,000 margin call but setting your stop loss at $100 means you’re risking the $100 in that trade and that is based on which the position size is actually calculated and as such it is worth noting that with this if you’re on a 1:2 risk to reward ratio that means that you will most certainly be losing -$100 when the stop loss triggers and will be gaining $200 when the profit target which is 1:2 triggers.

So in the direct explanation of what OP was saying $1000 to get $2000 is that the $1000 isn’t the margin only but also the stop loss. You cannot use $1000 margin with $100 stop loss and expect $2000 as the profit target in a 1:2 trade. From the OP $1000 is his stop but that doesn’t mean this amount is his total margin or capital that he is risking, his total margin could be $10000 and he is risking 10% of it on that trade.

[icebar]

You don't need a better win rate, you need better trade.

Remember, Risk management is not about winning every trade, is about Surviving every loss.

instead Risk Management builds Longevity

Risk management does indeed serve as a safeguard to keep our capital safe from losses we cannot afford. However, risk management is not limited to that alone; it is also used to ensure that we can balance the potential profits we can earn with the amount of risk we can bear or measure.

So, the point is that risk management should indeed protect us from major losses. And risk management actually acts as a brake or limit so that we can better control our trading psychology. Therefore, when discussing risk management, it is often paired with emotional management. Because with risk management, we’ve already measured the level of risk we’re taking, so even if the market moves contrary to our expectations, we won’t panic and will remain calm. Because everything is already factored into the risk calculations we’ve established.

And actually, risk management isn’t just about preserving capital. It must also reach the stage where we can minimize the risks taken and improve the profit-to-loss ratio.

In reality, risk management is the backbone of trading. Because in trading there are both profits and losses. If someone faces losses due to not following risk management, they often give up. And if someone acts according to risk management, then even if they face losses, they will not break down. Because they are aware of this in advance. Because risk management means accepting your losses in advance. It does not break your mental strength even in times of loss.

Again, in trading, you should not make any decisions based on emotions, but rather apply your skills and experience. You should not break down when facing losses, but rather identify your mistakes and correct them.

So, the first thing to do in trading is to follow your risk management and move forward with patience, confidence and understanding of the market situation. And this is the way of move forward for a trader.

[Abu-Naim]

This is just the reason traders are losing. You have $1000 to trade, but you want to use it to have PnL of +1000. That is when the person will think of high leverage when he noticed it is not possible with 1x leverage. And that will be the reason the person may think of shit coins that could be the reason he will lose.

Exactly, 1X leverage is very small, it is not about risk management now I think it’s about greed if one can expect to make 1000X of their investment with 1X leverage; it can only be possible with shitcoins once in a blue moon because it’s always a jackpot that don’t usually happens.

If you can be afraid to use at least 10x leverage in your trade with the name of risk management, then you shouldn’t be called trader because you will hardly make good money from trading and it will not stop you from losing some money as well. TP and SL is even better with good leverage, at least you can have some control and it is also a risk management technique to prevent losing all at once.

[Faisal2202]

This is just the reason traders are losing. You have $1000 to trade, but you want to use it to have PnL of +1000. That is when the person will think of high leverage when he noticed it is not possible with 1x leverage. And that will be the reason the person may think of shit coins that could be the reason he will lose.

I think that's just an example, he literally can't mean to target 2x with your $1k, although the more capital means more profit, so most likely we might sell earlier than 2x. When we do risk management in trading, we target a higher profit than the loss, so when we take risks, we go for more profit. That's why he meant so, even after we lost more trades than we have profitable ones, our net gains would be more than the loss.

Choosing shit coins with leverage is a suicide mission or mission impossible, you can say haha. I know people take such risk as well but they are not trading, they are gambling with their money with this mindset. Traders need to understand how much risk they should take for profit.

[Mpamaegbu]

Remember, Risk management is not about winning every trade, is about Surviving every loss.

This is why I don't chase every trade, and I don't chase price too. Once price leaves my territory, I'm not hasty to get in. I wait for a retest of that point of interest or area of interest to go in. If it doesn't return there, I kiss the trade goodbye. For me to even consider it a good trade in the first place to attract my interest it has to be something around 1:3 upwards. I don't do anything less than that. What that simply means for me is that I've to be wrong at least three times for the market to catch up with me. It's a safe distance to keep and that's why 1:2 is a no trade for me.

[Byebyebtc]

Trust me bro you definitely need a better win rate, I speak out of experience
Nevertheless a good Risk to reward ratio is very important, and should be your number one consern when it comes to risk management,

But to to be successful in trading you will have to merge a good win rate with a good risk to reward, and that is when success is guaranteed,


But in gambling no matter how you do it success can never be guaranteed its all still based in luck 

[Wakate]

Trust me bro you definitely need a better win rate, I speak out of experience
Nevertheless a good Risk to reward ratio is very important, and should be your number one consern when it comes to risk management,

But to to be successful in trading you will have to merge a good win rate with a good risk to reward, and that is when success is guaranteed,


But in gambling no matter how you do it success can never be guaranteed its all still based in luck  

When you have high win to reward ratio is the only way anyone can be profitable while trading.
If you are having a losing streaks, using a high win to reward ratio is going to be profitable for you because that alone can help you to recover most of your loses. Risk management is very essential for all traders that want to be profitable.

[Alphakilo]

Remember, Risk management is not about winning every trade, is about Surviving every loss.

This is why I don't chase every trade, and I don't chase price too. Once price leaves my territory, I'm not hasty to get in. I wait for a retest of that point of interest or area of interest to go in. If it doesn't return there, I kiss the trade goodbye. For me to even consider it a good trade in the first place to attract my interest it has to be something around 1:3 upwards. I don't do anything less than that. What that simply means for me is that I've to be wrong at least three times for the market to catch up with me. It's a safe distance to keep and that's why 1:2 is a no trade for me.

We certainly don't need a magician to say how discipline in trading is the separating factor between a professional trader and a gambler in this equation of course, because when you walk away most times from the market, it shows patience and your strategy of 1:3 ratio provides enough breathing room for you which is good and protects your capital.

It's bad to chase a high win rate when trading, but instead opt for the safest risk to reward ratio like you did and also opt to preserve your capital as a note of good financial management practice. Even when there's loss along the line, you can still recover and be there long enough for your edge to play out, but financial management practice is the best risk management approach to remain in the game until profit is made.

[Johnlomape]

When it comes in trading risk management is part of the strategy now if you have only a $1000 and you are just willingly to take a risk which is 10-20% capital this will be considered as a risk management anything that you are already aware with your plan and the possible situation and you know how to react if the strategy is against with your trade still its your plan. This is the reason why its essential to have a TP and SL in your trades now if you think open trades is just enough with your strategy there is no problem but we are just doing a practice of having a proper risk management.

Risk management is necessary for all traders to know and understand how to use it to help them reduce the potential of losing money to the market. Trading need different tools for a trader to use and become profitable.
Those that have been trading for a very long time would understand what it means to trade and use a very good strategy to make money from the market without losing too much even if losing is something we can not avoid as traders. The market changes that is why it's good to use a profitable strategy.

[Findingnemo]

How can we say that trying to make $2000 with $1000 is risk management? I know it is possible and everything is possible in this world for the sake of argument. But we also need to be realistic, finding a $20 profit trade with $1000 is more possible than finding one $2000 trade, so pick the one which is more likely to happen and keep repeating the cycle for a hundred times, it looks boring but it is kind of easy money compared to finding the most difficult trade of your life.

[AmoreJaz]

How can we say that trying to make $2000 with $1000 is risk management? I know it is possible and everything is possible in this world for the sake of argument. But we also need to be realistic, finding a $20 profit trade with $1000 is more possible than finding one $2000 trade, so pick the one which is more likely to happen and keep repeating the cycle for a hundred times, it looks boring but it is kind of easy money compared to finding the most difficult trade of your life.

You can make that happen if you are lucky enough to find an alt that is short-lived. Meaning, remember those pumpndump days in a lot of tokens before? So many crypto users earned good money at that time, however, a lot also lost. It is good that the ICO days were over as well. I've lost money in several ICO that I joined with. Invested some and never got something from it.

[WhoYouCantKill]

Risk management is necessary for all traders to know and understand how to use it to help them reduce the potential of losing money to the market. Trading need different tools for a trader to use and become profitable.
Those that have been trading for a very long time would understand what it means to trade and use a very good strategy to make money from the market without losing too much even if losing is something we can not avoid as traders. The market changes that is why it's good to use a profitable strategy.

You know people don't like what they will risk right, they always want short cut on how to get quick profit, but those who do risk management, understand its importance and work towards making it right, despite it might be boring, but this will make them to be profitable in it. That is why no matter what, they don't break the rule, they follow the rules and apply it rightly step by step and being consistent and discipline makes them to successful and profitable in their trading.

[Findingnemo]

How can we say that trying to make $2000 with $1000 is risk management? I know it is possible and everything is possible in this world for the sake of argument. But we also need to be realistic, finding a $20 profit trade with $1000 is more possible than finding one $2000 trade, so pick the one which is more likely to happen and keep repeating the cycle for a hundred times, it looks boring but it is kind of easy money compared to finding the most difficult trade of your life.

You can make that happen if you are lucky enough to find an alt that is short-lived. Meaning, remember those pumpndump days in a lot of tokens before? So many crypto users earned good money at that time, however, a lot also lost. It is good that the ICO days were over as well. I've lost money in several ICO that I joined with. Invested some and never got something from it.

That is what I am saying, it is not looking for consistency but a big jackpot that may or may not happen and we all know what would happen if someone treats trading in the same way as gambling. This is why being smart and look for the realistic margin will help us to reach the same height but it requires more effort though.

[GreatArkansas]

Only trade when you have 1:2 risk to rewards ratio.

I totally do not agree with the 1:2 RR; that is an unreasonable risk to be taking. That is, you are risking so much for so little.

The lowest for me should be a 1:3 RR; anything lower than that is not worth it. 

Well, it really depends on the trader. There are a lot of things to consider here, because for me, I'm also into 1:3 RR, but if your win rate drops too much waiting for those setups, sometimes 1:2 rr strategy can acually be more protifable for long run, a profit is already profits. You respect the profits, be consistent, even how smal it is, it's still a gain.

[michellee]

Risk management mean you know to trade and the money you will use. If you have $10,000, you don't have to use $1,000 to trade (spot or future) but lowering to $100 for each trade.

If you use $1,000 from the total $2,500 means you risks bigger especially in the random situation at the market. I don't want risking $1,000 and makes my target at least $2,000 as that is not easy to double your balance.

You learn from the book, video, tutorial, or others but that will be different in reality. You need to act based on market if you don't want to miss the chance or lost money and adjust the risk management based on situation.

I prefer make small profits than chasing bigger profits at once because that make us might not care with the market condition.

[ASloveapg]

When it comes in trading risk management is part of the strategy now if you have only a $1000 and you are just willingly to take a risk which is 10-20% capital this will be considered as a risk management anything that you are already aware with your plan and the possible situation and you know how to react if the strategy is against with your trade still its your plan. This is the reason why its essential to have a TP and SL in your trades now if you think open trades is just enough with your strategy there is no problem but we are just doing a practice of having a proper risk management.

Risk management is necessary for all traders to know and understand how to use it to help them reduce the potential of losing money to the market. Trading need different tools for a trader to use and become profitable.
Those that have been trading for a very long time would understand what it means to trade and use a very good strategy to make money from the market without losing too much even if losing is something we can not avoid as traders. The market changes that is why it's good to use a profitable strategy.

Trading is not 100% certain, so it is important to maintain risk management. Because if trading is damaged, it should be managed in advance so that it does not affect your personal life and you should use such an amount of money that even if you lose it, it will not affect your normal life. However, many people enter trading only with the mindset of profit, which is not realistic. You should also have a mindset of losing and use money that will not cause you any loss even if you lose money. Therefore, you should trade while keeping your risk limited. And focus on controlling losses. There is no sure strategy in trading that will guarantee anyone a profit. Therefore, you should have the mindset of surviving in the long term by limiting your losses by controlling your own risk.