The REAL Reasons for 2% Risk Management Trading Rule

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Traders know not to risk more than 2% on each trade but aren't given good enough reasons for this risk management rule. We'll explain the numbers, the psychology and more.

💬 If you’d like to get in touch, you can reach us on social media or leave a comment on this video - we read all of them and try to respond to as many people as possible.

TRADING RISK MANAGEMENT:
In this video, we discuss a common risk and money management rule that you should never risk more than 2% for each trade. Lots of traders follow this rule but it seems many don't know exactly why. The most common explanations fall short and just mention it's for capital protection, but we think there are deeper reasons. We'll take a look at the numbers side, the psychological aspects and the neurological aspects.

#Trading #RiskManagement #Risk

[vascobroma]

Consistency and small steps; those are the keys. For my first two years of trading I didn't risk more than $250 per trade. My average win was only a few dollars. Some of my trading buddies made fun of me for it. And it was hard seeing them make a few hundred or even a couple thousand on a trade when I only pulled in $7. But in the long run it pays off. They haven't done so hot overall... whereas I'm now able to slowly scale up to larger position sizes on the basis of an established routine that nets me more wins than losses. Patience pays off.

[DarkHill]

To be honest this is the most underrated channel I have ever seen in my life. You are a truly Gem Nicholas
Thank you for all of your hard work and all of these great videos.

[GoldenGrowthGuide]

Mastering Risk management reminds me of overcoming addiction, it is quite the journey. Good luck traders you can do this!

[RichieJames]

I risk 1% per trade initially but continue to load it up or buy into my trade as it goes in my favor. US30 is my baby and is making me richer by the day

[spitroastontoast]

I risk 1% per trade currently and will be looking to bump it up to 2% shortly...

Risk management once the trade is open is also a huge benefit. My average loss on a trade is just under 0.5% even when risking 1% per trade. With an average reward of 1.91% when I win with a 62% strike rate.

I have ran my stats through a trading simulator I have on excel from a fellow trader and over 5, 000 trades the maximum consecutive losses was around 9 in a row... but when paired with my risk management technique that is only about 4.5%... if I am able to implement my risk management technique on those losin positions which I am about 75% of the time.

[radicala]

I risk 2% on every trade and I scale out 50%, 30% and 20% of the position at my 3 respective profit taking zones.

[Jeff_Thomas]

My strategy is buying at the top of market and watching it go down. Then selling at the bottom of the market and watching it go up.

[oceanwest]

this is my life story, made 140K trading in 7 months, then had 1/2 losses, increased leverage lose more, risked more and then lost everything in 3-4 weeks

[motsampendulo]

I needed to see this video. I thought having 5 losses in a raw meant that trading isnt for me... Turns out it s normal. Im returning to the charts!!!

[danusia]

Loved it. So informative on so many levels! Thank you kindly ! Articulate English accent & witty humour a happy bonus :-)

[nofomo]

Interesting cause this is something I just learned from experience. About winning and being confident then suddenly taking a huge loss that wipes out progress. Good breakdown of the phycology of it all.

[michelleachacoso]

Finally! Real probability and statistics. Well done!

[chiedunduka-eze]

This is a very high quality video. Great work

[Preeno]

So, I’ve been a lurker on your channel for a while, I’m a Betfair Exchange sports trader on the football markets (newbie) and although you are not involved with that, I can relate to so many of your videos. This is one of them! Thank you! Keep up the psychological content :-)

[sheikhmohddanish]

One thing i learned over years that, Try to book 50% of half percent target rest 50% at 1% target this reduces my loss.

[HasithaCJ]

YT algorithm brought me here. This is gold!!!

[vandpiben]

No stop loss. Position size according to expected portfolio volatility instead. If a stock is expected to move 10% to change trend, then you only use 10% of your capital. So instead of using stop loss, your portfolio risk is just 1%. Buy low sell high individual stocks. Buy the market return using futures, will let free a lot of capital for swing trading. Let compound interest working for you.

[luckymak]

What to do with remain capital ? Nobody talk about this, because it happens when you enter in one stock, same time there is another stock that is breaking out, so there is always my capital stayed unused in my account

[raizadavarun]

Brilliant ! Really loved the video. We are capped at 2% per week and we take trades for 2 weeks at any given time. Entries are staggered to ensure max risk is reached when all our entries are triggered.

[lionelperez]

Great video ... definitely learned a lot from you over the years funny thing is you can risk 10% with no problem if you spread your trade into grid layers that cover a wide area ... especially if you wait for extreme oversold conditions first before buying with a wide grid layer passed a prop firm evaluation phase 1 and got 7 more weeks to make 4% more in which is a walk in the park keep the video's coming bro .. great energy