Risk Management


Hello Traders and programmers.

I would like to start a discussion about the various types of risk management that you can use in your trading to implement within our trading systems.

Well known risk managements are certainly the classic fixed lot or percentage lot risk, then you can use a system like the martingale to mediate the losses or the anti-martingale to squeeze the profits.

I know for a fact that there are also other mathematical formula-based management such as Kelly's formula. But I've never quite understood how it works. I think that as a trader we should know very well all the possible managements in order to have a complete picture and be able to choose the management that best suits our trading system.

I hope you can share your experiences with me

Using leverage would be advantageous if you had a sound risk management strategy because bigger leverages have a higher loss in value but also a higher loss in profit.
Risk management is one of the most important skills for forex traders to have in order to minimise risk and maximise profits.
AlanRiley #:
Risk management is one of the most important skills for forex traders to have in order to minimise risk and maximise profits.

First of all, if you want to manage risk with leverage you have to consider following

1. Any strategy which has 60% or more accuracy

2. When it fails 40% or more time then it should give a exit to cost to cost 90% time.

If the 2 conditions are met then only it is possible to manage risk using these methods

Risk managing steps

1. Use supply and demand to mark area on chart on higher timeframe minimum 15minutes for intraday and they should be shadows of candles. You can also use order blocks. Switch to lower timeframe like 1min now to place entries and you can also see price action to confirm if rejection is coming from there, It will help you to decide if to hold or exit.

2. Divide this range into 5 or 10 times 

3. Enter your entries in parts. If you divided this area 10 times then you should place 10 orders and a stop  loss of next supply demand area where your SL should be 2% max of your capital and when leverage is involved it should be 10 to 20% of your capital. Always note some of orders will not execute, if they do not execute and price is near TP, cancel them,

4. Find a breakeven point based on calculation of those 10 entries, If your trade fails, exit cost to cost at breakeven point, if trade do not fail, enjoy profit.


Unfortunately there is no such thing as a one-size-fits-all risk management system, but there are generally four types of risk management (with subcategories and variations among them) that can be applied, not only in trading, but all areas of life.

  • Risk acceptance.
  • Risk transference.
  • Risk avoidance.
  • Risk reduction.

The fixed lot approach that most traders use is a form of risk reduction. It's based on the premise that a risk decreases by taking actions to limit the impact of the perceived risks. This type of risk management is the most used, not because it is inherently better, but rather because it is foolproof in that you don't need to actively look out for potential risks and calculate their probabability and severity of impacting your account. Depending on the complexity of the trading system however, this approach might not be enough, because some risks cannot be reduced due to their nature.

That's where transference, avoidance and acceptance comes into play. Risk avoidance is probably the hardest to master because it requires the trader to have superior judgement in assessing potential risks that he might be exposed to when opening a trade. But if you have devised a good early-warning-system that prioritizes incoming risks of an event by their probability and severity, you can reliably avoid them, thereby reduce the loss given default per trade and increase your bottom line that way. This is my preferred method of trading the weekly chart.

Risk transference is unfortunately not possible for the retail trader, but if it were, it would be one of the greatest possible ways to eliminate risk completely while retaining the possibility to profit. The mechanism would be similar to a credit default swap (CDS) where you keep your asset, but transfer the risk (probability of loss or potential loss given default) to a third party. It's basically a contract. The price for taking on your risk will be a premium (similar to an insurance premium) that you have to pay regularly and whose price will be determined by the amount of risk involved in your transaction. If your trade turns out to be a loss, the third party becomes liable to pay for that loss. This is an option only banks and hedge funds have due to regulatory law.

The last type of risk management is risk acceptance. Sometimes the cost of mitigating risks can exceed the cost of the risk itself, in which case it makes more sense to simply accept the risk and hope for the best.


The key to navigating the dangers associated with trading is to keep losses to a minimum.

Creating a trading strategy that takes into account the win-loss ratio and the average of the wins and losses is the first step in risk management in trading.