The Forex Scalpers Risk Management

What is Risk management
(In business) the forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact. What does this mean, this means that we evaluate and identificate the chance and in order and followed by that we decide how much we want to risk.

Risk management Mindset
We are not traders, we don’t gamble we study the market. We are account managers. Every member has to understand that the top accountmanagers in the world are only able to make 1-2% MONTHLY and we challenge ourselves to do it DAILY. There’s not a problem with that but in order to get this results all parts of trading have be in top shape.

How to use Risk management?
I dont believe in fixed stops. In forex we believe in price action and in price history. Based on this information I decide my stop and I decide what I want to risk. We all trade zone to zone. so the first plan is to see what are we?

If we are bullish I enter on the retest of a broken zone or I enter after the confirmation a Higher Low is made.

If we are bearish I enter on the retest of a broken zone or I enter after the confirmation that a Lower High is made.

Now we can even have something stronger, we broke the zone it comes back up.
(if we are bearish) it makes a lower high at the previous broken zone.
(retest) this is an even stronger confirmation that we go down.
(broke the zone) ,came up, lower high. Enter.

Next Step.
We found our entry’s. Where is our TP ? EASY at the next zone or if we just want 10-15 pips we just take 10-15 pips. Also its based on the candle stick patterns. If I see price stall I just take profit.

Perfect the last step
Where is my stoploss? Initial when you go for a 1:2 risk reward or 1:1 Risk reward you use a fixed stop. But this means that your entry has to be exactly on point.

I use a mental stop and a Price action based stop for instance if you see the picture above. If I had enter on the bearish candle which confirmed the lower high made.

(I enter on this candle becaus this candle closes under the bullish candle) and I put my stop loss above the candle, it would have never been hit and my risk to reward would be have been 1:3 almost 1:4.

Why do I put my stoploss there? è market structure bearish is lower high lower lows, lower high is made, so lower low will be followed if we go up, its not the right set up.

Final thoughts

So this means the amount of pips you risk depends on the price action, the pair etc right? Right! So how do we make sure that we always have good risk management.

Simple. Follow the steps above, if the range is too tight, just DON’T TRADE IT, PATIENCE IS KEY. And the last and most important thing if you lose or win etc ALWAYS keep using the same lotsize for your account until you are ready to go up. 

Risk 1-5% per setup. But use the same lotsize. Why? Cause we are not hunting for money we are hunting for pips. If you use a 1.0 lotsize and your stoploss gets hit for 10 pips. After you use a 0.10 lotsize and you catch 40 pips. 

You have an positive pip count for the day (30 pips) but you are negative in money. Focus on Pips not on money.