First Step Risk Management Experiment: Return to Basics

newtrader101

Well-Known Member
#1
Hi,
I'd like to make risk management my first priority and criteria. That is, I'd like to develop the habit of considering a trade only if the risk is within my predetermined percentage. I feel this is what traders should be learning first. When methods start to succeed, greed takes over, and I forget about risk.

Hoping to learn this fundamental lesson through this thread. Wish me luck!
Just want to stick to this risk limit for 25 trades if all happen to be losses.
Risk percentage per trade: 2% of total capital
Trading capital: 5000. Risk per trade=100
Trading instruments: Any (except options), preference- CrudeoilM.
Trading method: Price Action/Bollinger band bounce
Stop: Price Action (previous pivot), BB bounce (one point beyond the candle tip that bounces off the Bollinger band.
Target: Price Action (>= Double the risk), BB bounce (near the other Bollinger band). Reward >=2% of capital
Trading frequency: Once per day
Time Frame: any (preference for one hour)

Basically this means:
In trend, enter when the bar bounces off the 21EMA.
In range, enter when the bar bounces off either of the extreme bollinger bands.
 
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newtrader101

Well-Known Member
#2
Trade 1:
CrudeoilMNov
1540475734489.png

Long entry: 4923
Stop: 4907
Risk: 160 = 3.2% (Yes it was higher than allowed risk of 2%. In that sense this is a failure)
Target: 2 x Risk= 4955
Hit target.

Capital =5000+320-15=5305

As Crudeoil needs 10-20 points stop, I'm increasing the risk limit to 4%.
 
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newtrader101

Well-Known Member
#3
Trade 2
CRUDEOILM
1540529446974.png

Reason: Ranging on one hour. Hit lower bollinger band on trading view. Should have waited for one hour candle to complete.
Risk was only 7 points in 5 minutes. 70/5000=1.4% Risk.
Entry: 4912
SL:4905
TGT:4926 (Dont have hope, so not keeping till Upper band.)

Stopped out.
1540531810974.png

Loss: 70+15=85
Capital =5305-85=5220
 
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newtrader101

Well-Known Member
#5
Trade 3
CRUDEOILM
Crude in intraday downtrend today.
Short entry:4944
SL:4960
TGT:4912
Risk:160=3.2% of 5000 (Mistake: Bollinger band entry should be at or near the band)
Reward= 2x Risk= 320

1540799085964.png


On 1 hour:
1540799160847.png


Stop hit. Loss=-175
Capital=5045
1540807946472.png

Compare these 1 hour charts of Crude on Trading view (on left) and MCX:
1540814863359.png
1540814954918.png


In the evening, I broke the rule of one trade per day and entered twice more on Crude, but trying to keep risk within limit, the stop wasn't proper. Stopped out. Total loss 200+15x3=245.
Capital=4975
 
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newtrader101

Well-Known Member
#6
CRUDEOILM
Crude seems to have broken down through the first 30 mins range.
SHORT ENTRY @4944
STOP:4957(Just above top of range) Risk: 130
Target: 4912 (Just within the bottom of the range, i.e within previous low) Reward: 320
Exited @ 4930 as the volume seemed weak. Profit=140-15=125
Capital=5100.

1540879266727.png


REVISITING THE RULES:
In order to make the trade entry meaningful (not just low risk) It is critical to:
1) Wait for the setup to form
2) Enter only at the correct points (Bollinger bands: Just near the extreme bands, and after the candle has fully formed; PA: Entry on a pullback or atleast after an opposite candle has reversed)
 
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newtrader101

Well-Known Member
#7
On tradingview Crude is showing downtrend on 1 hr:
1540962347838.png

MCX at Market open:
1540962412834.png
1540962605458.png

TRADE 7
SHORT ENTRY:4924
SL:4934 RISK: 100
TGT: 4820
Stopped out.
Loss= 115
 

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newtrader101

Well-Known Member
#8
Had two more trades in between
TRADE 10 (based on Bollinger bounce on 1 hour and Price action on 5 min):
SHORT ENTRY 4912
STOP LOSS 4931-4927-
TARGET: LBB 1 hr : 4849 EXIT:4902
1540992592217.png


1540992554864.png

Eventhough this trade was profitable, today's overall loss=-445.
I forgot entirely the purpose of this thread, which was to learn Risk Management. So taking a day off from trading tomorrow.
 
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newtrader101

Well-Known Member
#9
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#10
Thanks for sharing the information about the risk management and money management as it will hell the youngster to under the risk management techniques to make handsome sum of profit from their investments without taking account the worries and risk of investment to liquidate.
 

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