Figuring Out Risk Management
Firstly forget everything you may have read. Especially the only risk the 1% of this or the 2% of that. It is not the real world and pretty much full of shit.
Risk management is dictated SOLELY by the probability of your system.
Risk management is how many times your system losses and by how much. Also how many times your system wins and by how much.
Simple explanation: 7 wins /3 losses,70% win rate. I should add here that systems in general have a success rate between 40-60%. Your risk is 3/10
Average loss is 20 pips, average gain is 20 pips. "just to keep it simple".
Now i am not going to work the rest of the math out for you, as this is where you decide your bet on what you emotionally feel comfortable doing but keep it within 3/10.
YOU MUST KNOW YOUR SYSTEM IN AND OUT, IF YOU DONT NO AMOUNT OF MATH IS GOING TO SAVE IT.
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