Risk management

Question 1

What kind of stop order to use?

Answer 1

Always use market stop

Question 2

Stop loss is based on R:R or TA levels?

Answer 2

Purely on TA, at the TA invalidation level

Market doesn’t care about your R:R percentage

At what price level is your idea wrong according to TA?

Question 3

What question to ask self to find stop placement

Answer 3

At what price level is your idea wrong according to TA?

Question 4

How much to risk losing of trading account on each trade?

Answer 4

1-4%

Use 3%

3 trades in a row drop to 1-2%

Equation for position size - see image

Question 5

If you don’t know where to place a stop or the stop placement area isn’t good what does this mean?

Answer 5

The trade idea isn’t great

Question 6

Why is understanding your average winning R (reward / profit) when trading using a system

Answer 6

It tells you what your win rate needs to be for system to be successful

See image

Question 7

Why should you never move your stop to break even simply due to

Answer 7

You feel like you’re getting a free risk free trade,
- but you did take risk before you moved the stop,
- and now you’re reducing the chance of getting the pay off
- retests and stop hunts at support or resistance are very common even though it’ll eventually hit your target

Question 8

What is evolving R?

Answer 8

It’s the risk reward having changed so you need to manage the trade (as in potentially move stop)

Don’t just sit in trade if R is terrible

Question - if the risk reward to your stop worth it, if 1 upside to take profit vs 4 downside to stop loss this means it’s not worth just waiting for stock to be hit

Don’t let winners turn into losers