Comments on: Risk Reward and Money Management in Forex Trading

By: Pele

Pele — Mon, 28 Aug 2023 23:28:44 +0000

This post is critical in succeeding in FX trading. The importance of position sizing risk/reward and fixed $ amount to potentially loose and sticking with it. Instead of opting for the insidious % fixed model that sounds more like throwing good money after bad money.

By: elly

elly — Thu, 30 May 2019 19:38:19 +0000

I REALY used to ignore MM but not after reading this…….thanks Nial for all your efforts to help other traders succeed. Be blessed.

By: Zinnur

Zinnur — Sun, 21 Apr 2019 15:57:48 +0000

Important lesson! Thanks

By: JOHAN

JOHAN — Sun, 18 Sep 2016 18:06:43 +0000

I am new to trading. This is a great ARTICLE and i will for sure follow your advice. I am also bussy reading all other articles.
GREAT STUFF.

By: alang

alang — Thu, 27 Mar 2014 02:54:19 +0000

thumbs up!!!!

By: David

David — Sat, 02 Nov 2013 22:38:35 +0000

When I started with trading a year ago MM was my worst favorite topic. Thanks Neil, you made it simple to understand. Keep it up!

By: Bin

Bin — Sat, 26 Jan 2013 13:30:41 +0000

Greeting Nial.
Great article!
I am thinking of leverage as well you did not mention in your article above. However is it reasonable to say that it is better to take highest leverage of the trade I am allowed?

Thank you.

Bin

By: Siyabonga

Siyabonga — Sat, 12 Jan 2013 19:27:46 +0000

Nial
I don’t know where you came from nor where you are going. But you are scary!!!! What you know is scary.

I’m an accountant by profession but with this article, I think you cracked the code!

Every trader must study this article.

God bless you even more, with wisdom.

By: Victor

Victor — Wed, 03 Oct 2012 20:31:06 +0000

Hi Nial,
Thanks for the article. I’m new to trading and would like to know few things,
– How much drawndown (or balance in account) before I reduce the $100?
– How much do we need to increase our balance before increasing the fixed $ risk?

Regards,
Victor Yong

By: Michael M

Michael M — Sat, 02 Jun 2012 01:03:25 +0000

Increasing the reward versus the risk sounds attractive, but I think the more important thing to notice is how much, on average, does price action move above your take profit level with equal risk to reward (1/1). If on most of your winning trades (1/1) the market moves 3x your risk then 3x risk would be appropriate. But increasing your reward vs risk to 3x on your trades, even though the majority of your trades would be nullified because of an activated stop loss wouldn’t be worth it. People shouldn’t forget that you can be very specific about the risk/reward and have a profile that is 1/1.25 or 1/1.33, 1/1.5, 1/1.75. It’s whatever profile matches the trading consistency you have developed through demo trading at equal risk vs reward. I wish I read this article 4 years ago.

By: Michael

Michael — Wed, 07 Sep 2011 17:32:12 +0000

@ Manuel, u are correct, just was about to post that. Anyhow Nial is a great guy…. I have learnt a lot from him…. i incorporate his method and fine tuned some to soothe me needs..anyhow Kudos to you…..

By: Manuel

Manuel — Sun, 26 Jun 2011 16:19:55 +0000

Hi Nial!
I have found today your website and i think it’s very interesting! I’m a trader, i started one year ago … I live in italy and i started to trade following the price action metods with witch i find so well .
But i’ve read this article about the money management and when you refer to chose between fixed risk or % risk i think your example is not fully correct . In fact if you think to use a % risk of 2%, your fixed risk should be of 40 $ and not 100$ . With 100 $ your risk is the 5% … In this way the final result will be different, showing that fixed risk is not better than the % risk, but similar … (at the end of the 25 trades the % risk is light better than the fixed risk …)
I hope to have been clear (sorry for my not perfect english ;) )
I continue to follow you
Thanks

Manuel

By: Kristian

Kristian — Sat, 04 Jun 2011 12:52:12 +0000

Having strugled for years with emotions… These pages have opened up the perspective of how simple and fearless forex trading can be.
Mr. Fuller! You have made my day with your simple aproach to the matter!

By: Vickie

Vickie — Mon, 02 May 2011 06:57:05 +0000

FIRST explanation on this topic that has made sense to me, and I love the comparison of fixed $ amount vs percentage! Very smart…

By: thompson

thompson — Fri, 29 Apr 2011 07:24:32 +0000

You have made the world understand that Forex is far from what many people think it is.God Bless you Nial.

By: thompson

thompson — Fri, 29 Apr 2011 07:22:29 +0000

GOD blees you Nail.

By: nial

nial — Sat, 23 Apr 2011 00:51:36 +0000

In reply to Any. It's not about being sure, it's about being realistic.

By: Any

Any — Fri, 22 Apr 2011 13:43:50 +0000

Hi Nial,

are you sure that e.g. having 30% of winning trades with R/R 1:3 is easier than having 60% of winning trades with R/R 1:1.

thanks for your lessons
Any

By: nial

nial — Fri, 22 Apr 2011 10:45:56 +0000

In reply to frank. I do personally, and will be hard coding something like this into the members area soon.

By: Mojet

Mojet — Fri, 22 Apr 2011 05:09:43 +0000

Nial,

Great Lesson. Thanks a lot Nial.

By: Phil

Phil — Thu, 21 Apr 2011 22:48:07 +0000

Nial’s money management articles are the best part of his entire course. Nobody else teaches this.

By: Majid

Majid — Thu, 21 Apr 2011 08:04:36 +0000

thank you very much Nail, this artical is vital for me and I will implement these abilities on my trading.

By: chinedu

chinedu — Wed, 20 Apr 2011 01:39:06 +0000

another good one. one thing i was thinking when i started trading was i had to win all my trades. it got me no where, until i started to practice proper money management skills. thanks for refreshing my memory once again.

By: frank

frank — Tue, 19 Apr 2011 22:56:09 +0000

Thanks Nial, Very useful. Do you have an excel sheet that does the automatic calculation given in the capital, number pips to risk and it automatically calculates the position sizing for the fixed model and 2% model?

By: yvan

yvan — Tue, 19 Apr 2011 04:39:41 +0000

Nial, you’re GOD!!
Thank you SO much!!
Amen!

By: Simon

Simon — Tue, 19 Apr 2011 01:10:36 +0000

Great lesson Nial!
helps me a lot to stay focused on the basics elements that are so critical in being and staying a profitable trader, it’s so easy to carried away if the key elements in your plan are not solidely established and respected! cheers!

By: krzysiek

krzysiek — Mon, 18 Apr 2011 13:19:34 +0000

Yep, great article as always but it’s a little bit scary to me risking $100 while I’m having $2,000 account;] IMHO for me, as a completely newbie a better way to ‘beat the market’ is to start with 2% option and then, when I get some confidence with my trading move over to fixed $100 strategy. Regards

By: Gurpal

Gurpal — Mon, 18 Apr 2011 10:24:22 +0000

Hi Nial,

Hope you are well. Another fantastic article. Thank you very much.

Thanks and Regards

Gurpal

By: andrew

andrew — Sun, 17 Apr 2011 23:54:58 +0000

thank”s.

By: Geo

Geo — Sun, 17 Apr 2011 21:40:00 +0000

Love examples Nial, a great lesson once again, keep examples coming. Thanks Nial.

By: Zak

Zak — Sun, 17 Apr 2011 19:29:49 +0000

Thanks Nial, this is beautifully explained and very useful.

By: Olusola

Olusola — Sun, 17 Apr 2011 17:20:31 +0000

U are just too precious with your articles.Thank u and keep it up.
Once again ,thank u.
Olusola
Nigeria

By: Wtep

Wtep — Sun, 17 Apr 2011 10:48:39 +0000

Thanks Nial

Thailand

By: Daniel

Daniel — Sun, 17 Apr 2011 07:51:33 +0000

As a member of LTTTM I can say that understanding and implementing the principles in this article are what has made me profitable as a trader – I am 3 months in profit in a row on my demo and in profit for my 4th month. If I make 5 months in a row I will go ‘live’. Manage your risk well, take your profit and everything else falls into place….Also, as a bonus, I can really fluff up my analysis and lose money safe in the knowledge that my rewards will outweigh my risk over the long term…

By: Henry

Henry — Sat, 16 Apr 2011 18:33:00 +0000

Thanks Nial – great article; definitely required reading for all newbie traders. Thanks for your willingness to share your knowledge.

Regards
Henry

By: Chris S.E.

Chris S.E. — Sat, 16 Apr 2011 17:53:39 +0000

Nial, Excellent, as usual! I have, after 3.5 years of FX [complicated] edu finally have the right [simple] place to roost :) While mastering the Price Action, might as well master MM while I am at it. I think real soon, I’ll be soaring with all the other eagles in here!! Thanks so much!!! God bless.

By: henry

henry — Sat, 16 Apr 2011 17:03:36 +0000

thank’s Nial…so useful for my supply and demand analysis

henry
Indonesia

By: TRACY

TRACY — Sat, 16 Apr 2011 14:11:59 +0000

JUST WHEN I THINK YOU’VE GIVEN US ALL THE WEAPONS WE NEED FOR SUCCESS…BAM! YOU PULL ANOTHER GREAT ONE OUT OF YOUR HAT. SWEET LESSON, NIAL.

By: rikus

rikus — Sat, 16 Apr 2011 13:10:15 +0000

Hai Nial,

Thanks for this articles. I will read it over n over again
to fully understand it.

Rikus

By: olajubu

olajubu — Sat, 16 Apr 2011 09:14:37 +0000

It is good to refresh our brain sometime with what we have learned in the past. The article look as if, I heard it for the first time. Thank Nial for reminding me of this important aspect.

By: kotijett

kotijett — Sat, 16 Apr 2011 00:57:54 +0000

Thanks Nial. Great stuff as I always enjoy your articles. Extremely practicle and priceless.

By: xback

xback — Fri, 15 Apr 2011 23:34:41 +0000

thanks nial

By: Cristian Trofinenco

Cristian Trofinenco — Fri, 15 Apr 2011 23:04:23 +0000

I’m just an aspiring trader and have been just reading for six months or so, this web site being definitely my best forex discovery :).
As for fix amount versus fixed percentage, in the long run (at least 100-200) fixed percentage is certainly superior (Kelly criterion). As can be seen the the table above both the growth AND the drawdown of the fixed percentage order size were smaller.
It would be interesting to see the two strategies side by side on two live accounts with ‘mirrored’ trades.

By: Andy H

Andy H — Fri, 15 Apr 2011 15:11:01 +0000

Hi Nial,

Question. Before we master a good strategy would it be OK to implement the risk % method to limit losses. I like the fixed dollar amount once I am consistently profitable :) Also, at what point should we increase the fixed dollar amount risked? I plan on starting with $3,000 and risking $30 every time, then if and when my account hits $4,000 increasing the risk to $40.

Thanks!

By: Ike

Ike — Fri, 15 Apr 2011 15:09:16 +0000

Yep. Simple. Yet, crucial. Without proper risk management methods in place, there is no need to place a trade.

It allows you to partake in trading in a business fashion – to confidently build a scalable business(especially when applying the percentage model).

Thanks Nial for helping me to personally improve my trading by understand consolidations which often involve pin bars/inside bars/and as you say ‘fakeys’.

Ike
Los Angeles

By: nial

nial — Fri, 15 Apr 2011 12:44:44 +0000

In reply to Hugo Jensen. I tend to withdraw profits .. but if you leave the money in the account, it's up to you when you want to increase the fixed amount. I personally don't compound my account forever, it's not logical. Traders have to draw down money in order to realize the gains the have made. They risk giving it back to the market if they leave it all in the account.

By: Hugo Jensen

Hugo Jensen — Fri, 15 Apr 2011 12:17:05 +0000

Very clever way to look at MM thank you, it has always
been my biggest problem.

Nial, you are using $100 as example for risk, when would
you rise the stake to say $200, would that be after a set
winning days, or doubling of your account, what criteria would you use?

Thanks Nial

By: FloorStalker

FloorStalker — Fri, 15 Apr 2011 12:07:08 +0000

Nial,
Excellent article…easy to understand what has been a complicated subject for me…until now.
Thanks much.
Cliff
Hastings, Minnesota

By: Kenny R

Kenny R — Fri, 15 Apr 2011 12:04:13 +0000

I remember that article about the fixed amount of dollars vs the fixed amount of risk per trade and it was an eye opener! I have been using that method and my account has grown much faster because of it when I hit a good number of winning trades in a row.

A great trading strategy that is mastered, along with the proper trading pyschology (Respect Greed and Fear but don’t let either consume you) and excellent money management are the real keys to success in trading.

Sadly though, 95% people will not take the time to discover this truth so in the meantime I along with other professional traders will be on the other side of the losing trades that the newbies continue to take until they realize there is no magic indicator or forex robot that exists.

Thanks so much for teaching me PA Nial! You have no idea how much you transformed my life forever! :-)

By: Reza

Reza — Fri, 15 Apr 2011 11:57:39 +0000

very nice and important subject.
Thanks Nail