Professional trading
Limited fixed risk on every trade to maximum 1% of the account. The position size will be calculated based on the risk. To lose an account you will have to lose 100 trades in a row.
Amen to that. The "problem" in practical terms is that most traders are light on trading capital and, therefore, tempted to risk big in order to win big─otherwise trading is perceived as not worth their while.
Limited fixed risk on all open trades to maximum 5% of the account. This means maximum 5 opened trades. If all fail, thats maximum 5% hit on the account. Drawdown would also be maximum 5%.
I really don't see the point of establishing a max risk of 1% x account and then disregarding it by adding to a position─unless you're pyramiding based on floating profit with progressive stops. Of course, the former applies to a Netting Mode account while the latter applies to a Hedge Mode account.
Risk/Reward ratio should be at least 1:2 on every trade. I saw some signals claim they have Stop Loss, but it is way far out. For example some put SL 100 pips away to win 10 pips. Thats not a good Risk management. You risking 100 pips to win 10. This is pretty much the same as no SL.
IMHO, RR ratios are unnecessary provided that your stop is where it needs to be. The aforementioned 1% stop combined with an uncapped dynamic exit is tough to beat.
Hard Stop Loss on 1% risk. No soft SL. SL can never be moved to increase the risk. The only way SL can be moved is in the direction of the trade for those strategy that use trailing SL. This way you will not going to see red dots on MAE graph.
Sounds good. I would merely add that the aforementioned dynamic exit can act as an "above the fixed stop" stop where the current dynamic stop is floating below breakeven and above the fixed stop.
No Martingale, Grid or anything of that nature. This is just a time bomb. Boom and Bust strategy.
Agreed, unless you're admittedly into gambling. I went on about this in another thread:
Forum on trading, automated trading systems and testing trading strategies
What are your favorite position sizing methods?
Ryan L Johnson, 2026.03.06 17:29
Frankly, nothing in this poll/thread is a strategy─these are merely position sizing methods.
Having said that, the infiltration of gambling into the industry of trading is very curious. Another example of this is the Kelly Criterion which originated in the gambling industry. The most flagrant infiltration is the U.S. Commodities and Futures Trading Commission's jurisdiction over "prediction markets." How something as "gambley" as predicting the amount of time that a political speech will last became a commodity, I will never understand. Similarly, a U.S. court of law declared that a Blackjack tournament was a game of skill instead of luck, thereby allowing the winner to avoid the prizes and awards tax.
We also must consider the gray areas such as a long-term positional trader who adds to her/his profitable position(s) during retracements. This is definitely not Martingaling nor gridding but certainly is pyramiding.
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I have analyzed a lot of Signals and was surprised to see how many of them have very poor or no Risk Management at all. I was also surprised that some of the high risk strategy accounts with high risk clearly shown on MAE graph (a lot of red dots) get high Reliability rating. I think that formula does not give enough rating to the Risk
I thought it would be interesting to have a discussion on what Professional trading is. Here is my criteria:
1. Limited fixed risk on every trade to maximum 1% of the account. The position size will be calculated based on the risk. To lose an account you will have to lose 100 trades in a row.
2. Limited fixed risk on all open trades to maximum 5% of the account. This means maximum 5 opened trades. If all fail, thats maximum 5% hit on the account. Drawdown would also be maximum 5%.
3. Risk/Reward ratio should be at least 1:2 on every trade. I saw some signals claim they have Stop Loss, but it is way far out. For example some put SL 100 pips away to win 10 pips. Thats not a good Risk management. You risking 100 pips to win 10. This is pretty much the same as no SL.
4. Hard Stop Loss on 1% risk. No soft SL. SL can never be moved to increase the risk. The only way SL can be moved is in the direction of the trade for those strategy that use trailing SL. This way you will not going to see red dots on MAE graph.
4. No Martingale, Grid or anything of that nature. This is just a time bomb. Boom and Bust strategy.
I understand some people want high risk, gambling kind of game. That's not what I am talking about here, please do not bring those arguments. I am talking about steady growth approach with the good Money and Risk Management, like institution do.