The "Art of low-risk Forex Trading"

The common problem many Forex Traders faced, is that they can be making 6 profitable trades in a row and only to lose them all over 2 or 3 trades!

S0 WHAT ARE THE PROBLEMS ?

Vicious Markets?....... Greed?...... Bad Judgment?...... Bad Luck?

CAN WE REVERSE THIS ?

We cannot change how the market moves. It has its own random rhythm which we, as mere mortals, will not be able to ride every wave the market throws at us. 

While we cannot control the cards that are dealt on us, we can decide how we want to play the dealt cards. How do we do it ?

The "Art of low-risk Forex Trading" uses a very simple 1:3 risk-reward methodology.

For every single forex trade put on, we are prepared to lose 1 and make 3 units.

When we are able to identify a low-risk trading opportunity, which is one whereby we can see the potential of losing only 1 unit while making 2 or 3 units, we will then put on that trade.

LET'S LOOK AT THE MATHS

Assume we test a sample of 10 trades and only 2 or 3 trades will be profitable.

1:2 (lose 1 but make 2)

7 Losers + 3 Winners = -7 + 6 = -1

8 Losers + 2 Winners = -8 +4 = -4

1:3(Lose 1 but make 3)

7 Losers + 3 Winners = -7 + 9= +2

8 Losers + 2 Winners = -8 +6 = -2

You will notice from the above, we are allowing ourselves more chances of making wrong trades. Only 2 or 3 out of the ten trades will be profitable. This is a good system to use. The system allows us to make many mistakes but yet, when we finally nailed the last 2 or 3 right trades, the net drawdown from out mistakes are kept very minimal at +2 or -2 !

This is a very sound money-management technique that is very forgiving. If applied over the long run, the strict money management rules will take care of of the up-side for us. 

This is how we play with the cards that we are dealt with !