What is Risk Management?
Risk Management ensures that your initial deposit / capital is sensibly used when placing trades, to ensure that your entire account value is not lost over one or two losing trades.
Our Recommended Risk Management Strategy
We recommend that your starting deposit is 2,500 times the amount per pip that you wish to trade. For beginner traders, we'd recommend £1 per pip, as this requires a smaller starting deposit.
When we send you a Trade Notification, the maximum exposure (potential loss) on a trade will be 125 pips, which translates to approximately 5% of your account. This ensures that a run of losing trades will not lose all of your deposit. To date, our biggest drawdown (successive losing trades) has totalled -21.99% of an account's starting balance (not the entire balance).
For example, if your starting balance was £2,500, and you had started trading at the start of our biggest drawdown, your account balance would drop to £1,950.25 before winning trades began.
We would need a run of 20 consecutive losing trades, (all of which would need a maximum exposure of 125 pips each), or 40 consecutive losing trades, (all of which would need an average exposure of 62.5 pips each ) for your initial account to be lost completely. This has never happened to date, as you can see on our Results.
We always trade with a 3:1 reward to risk ratio, which means that the profit target will be triple the maximum exposure. This minimises losses, and maximises profits.
|Price per Pip||Starting Deposit||Maximum Exposure per Trade||Maximum Profit per Trade|
To summarize, our Risk Management strategy is:
- Starting Deposit: 2500 x Price per Pip
- Guaranteed Stop Losses and Targets set on Trades
- Maximum Exposure per Trade: 125 Pips (5% of Starting Deposit)
- No scalping / short timeframe trades
- No follow up signals or change of strategy on active trades (i.e. no further risk to your account)
- Minimum 3:1 reward to risk ratio