Vsmith

Hey💚 I’m a Forex trader, and I’m here to document my journey while sharing practical and educational content along the way. The goal is simple: to develop the knowledge, discipline, and consistency needed to become a profitable trader.

That completes risk management 🛡️ Size by risk, set the stop by the chart, aim for a good reward, and set limits to protect yourself. Next up: TRADING PSYCHOLOGY 🧠 ❤️ Like, 🔁 share and follow so you don't miss it.

Keep in mind ⚠️ The figures here, such as 1% to 2% risk and a 3% daily limit, are common teaching guidelines, not advice. Your own limits depend on your account and experience. Practise on a demo account first.

Habits that protect you ✅ Always use a stop loss Never move a stop further away Don't risk more to win back a loss Keep a trading journal Avoid over-trading

Set your limits 🚧 Many traders use a daily loss limit, such as 3% of the account, and stop trading once it is hit. Stopping early protects both your money and your judgement.

Drawdown 📉 The drop in your account from its peak. A losing streak is normal. At 1% risk, 10 losses in a row cost about 10%. At 10% risk per trade, the same streak would cost the whole of your account.

Leverage and risk ⚡ Leverage does not set your risk. Your stop loss and position size do. High leverage just makes it easy to open a position far too large for your account. Use the sizing method from Part 1.

Spreads and costs Spreads and commissions are a cost on every trade, so real results are slightly lower. Very tight stops suffer most, because the spread takes a bigger share of the risk.

Example 🧮 10 trades, $10 risked each, 1:2 RR, and only 4 winners. Wins: 4 × $20 = $80 Losses: 6 × $10 = $60 Net: +$20 Even with 60% losing trades, the account grew (before costs).

The other side ⚠️ At 1:1, you must win more than half your trades just to break even, and costs make it harder. A low RR leaves very little room for error.

Why it matters 💡 With a good RR, you can be wrong often and still profit. At 1:2, you only need to win about 1 trade in 3 to break even, before costs.

Risk-to-reward ratio (RR) How much you stand to gain compared with what you risk. Risk 13 pips to target 52 pips = 1:4. The reward is four times the risk. Risk 10 pips to target 10 pips = 1:1.

⚖️ Risk vs Reward: The Maths Behind Surviving (Part 2) In Part 1, we sized a trade. Now we look at what a trade can earn for that risk, and the limits that protect your account 🧵👇

In Part 2, we cover risk-to-reward, win rate, leverage and drawdown. ❤️ Like, 🔁 share and follow so you don't miss it.

A common mistake ❌ Choosing a lot size first, then squeezing the stop to fit it. That puts your stop inside normal price movement, so you get stopped out before your idea has a chance to play out.

Notice what happened. The chart set the stop. The risk set the lot size. The two work together. A wider stop means a smaller position. A tighter stop allows a bigger one. Either way, the money at risk stays the same.

Step 3: Size the position 🧮 Position size = money at risk ÷ (stop distance in pips × value per pip) Risk $10 with a 13-pip stop: $10 ÷ 13 = about $0.77 per pip. At about $0.10 per pip for each micro lot, that is roughly 7 micro lots (0.07 lots).

Step 2: Measure the distance 📏 Count the pips between your entry and your stop loss. Example: entry at 1.1038, stop at 1.1025. The distance is 13 pips.

Step 1: Choose your stop loss 🛑 Place it where your trade idea is proven wrong, such as beyond the order block or the liquidity sweep. The chart decides the stop. Not how much you want to risk.