The Right Way to Manage Risk

Hello, Daily Direction readers!

We’ve reached Friday, which means it’s time to wrap up another trading week, unwind over the weekend, and prepare to start all over again on Monday!

One of the best ways to prepare for the trading week is to go over some of the key facts that support my methodology. The most common fear I hear from my students is the risk linked to trading.

Anything involving money is inherently risky. That is simply a fact of life. However, because of the risk of financial loss, trading may make a lot of individuals anxious.

However, if you use the right strategy, you can mitigate the potential for loss and make sure you win more trades than you lose!

Keep reading to learn how to properly gauge and manage risk while trading the futures market. It’s information critical to your success as a trader!

Formula For Growth

A formula for growth is applied in futures trading. You’re not going to win every single trade, so you’re going to need a strategy. You must accept the reality that there is a risk you will lose some of your money when you enter a trade.

Trading is never viewed as simply one, two, three, or four trades. For you to have a better understanding of the formula, we’ll call ten trades “one block”. Keep in mind that you should always set a minimum of a 10-trade or one block when it comes to succeeding in trading. Placing ten or more trades will help you generate more profit.

formula for growth

The formula helps you to estimate the percentage that you’re going to lose or win on a single trade with a one-block minimum. For example, say that you win six blocks and you lose four. If you know that you’re going to be a 60% winner, you have to have a plan for this.

Risk Vs. Reward

Let’s look at this from a different angle. Say that you see you’re going to win double the amount that you lose, or you’re trying to win $200 per trade.

By playing six trades, you’ll get $1,200. With the formula mentioned above, all you have to do is double, triple, quadruple, or add more to your initial trade to win more profit in the end.

So, for six trades, you might get $1,200, but you’ll lose $400. All in all, you’ll end up with a net gain of $800 for every ten trades.

risk vs reward

What happens is this; if you start trading and immediately lose $200, you might think that the strategy is not working and give up. However, you’re going to prevent yourself from the $1800 net gain that the formula is supposed to give you. You have to understand how many times and how much you’re going to win and lose.

Now that you have the basic information to help you understand how to manage risk, it’s time to take the next step toward becoming a winning trader! You need to stop making excuses and move forward. You’re account won’t grow unless you make the trades, and I’m here to help.

Keep On Trading,

Mindset Advantage: Find A Balance

When it comes to your mindset for trading, you’ll find that your ability to cope with the markets, bad trades, good trades – whatever – has more to do with how you spend your time outside of trading. More specifically, how much balance you have.

In fact, of your total state of readiness, 10% may have to do with charts and price levels. The other 90% has to do with how rested you are. How focused you are. How happy you are.

Find a balance that works for you and begin the path towards happy trading.

Traders Training Session

How-to Fibonacci Retracement Tutorial
How-to Fibonacci Retracement Tutorial

Stay tuned for my next edition of Josh’s Daily Direction.

And if you know someone who’d love to make this a part of their morning routine, send them over to https://joshsdailydirection.com/ to get signed up!

Josh Martinez

Josh Martinez

Josh Martinez is an elite Analyst who’s been actively trading the financial markets since 2011. He’s known as one the leading innovative traders in this industry due to his his cutting-edge strategies.

Josh first burst into the scene when he took an initial deposit investment of $500 and turned into over $39,000 in just under 2 years.
Josh’s trading articles have been featured in Your Trading Edge, The FX Street, Trader Planet, Forex Crunch, Trading Pub, and Equities.com.

In addition to trading, Joshua has also trained thousands of traders worldwide. His strategies and systems have helped others find success in the market

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