Original subtitles

Hello, everyone.

We'll be discussing risk management and the importance of risk management.

Risk management is the most important thing while trading and investing in the financial markets, managing

risk is the top priority of every trader and investor in the financial markets.

There is a famous quote by American financier and a business tycoon and trading and investing.

It's not about how much you make, but how much you don't lose.

It's a billion dollar quote by one of the legendary philanthropist and investor.

So what is the risk management?

I'll give you a question right now, but let's assume you're crossing a deep river and you don't know

how to swim.

And you got two boats.

Both number eight has a life jacket and boat number B has no life jacket.

I'll give you five seconds.

What would be your choice, A or B?

So obviously, it would be the one with lifejacket.

So this is how risk management saves us when we face a series of loss and drawdown in managing the risk

is the most important thing in.

This is the same as the boat which I have given you the example when the boat sinks.

The only thing which gives us is our life jacket.

Same is the case with risk management.

Now, before going to the implementation phase, I would like to tell you how much you should risk.

Most traders and investors in the financial markets are comfortable risking one to two percent of the

capital, one to two percent risk per trade is the baseline to start with.

I would recommend every trader to start with one to two percent risk, but trade off the capital in

the initial stages.

Later on, when you are having consistent wins throughout the month, you should increase your risk

slowly and gradually.

One to two percent should be strict risk management.

In the start, I would not suggest to risk more than one to two percent during the start for an experienced

trader.

Even I have professional trader friends who only risk one to two percent trade, and that's a sign of

a professional trader.

So I would encourage everyone to choose one to two percent risk by trade off the capital.

Managing risk removes all our stress from trading.

No, what is the risk to reward ratio?

Risk to reward ratio is commonly known as R ratio.

Here, the R reflects how much risk a trader is taking on a trade to reach a certain reward.

I'll explain in the next page.

Now let's implement the risk management.

Let's assume we have a portfolio size of six thousand US dollars.

We are only receiving two percent of our portfolio, which is one twenty dollars.

Two percent of six thousand dollars is one twenty dollars and we are only taking trades with three are.

But I've explained this previously are means risk to reward.

Here we are risking 120 dollars for 360 dollars of profit expected profit.

If the take profit hits is 360 dollars.

If you take a trade with two percent risk of this current portfolio with three risk to reward ratio.

So our expected profit, if our take profit hits is 360 dollars and our expected loss if our stop loss

gets hit would be one twenty dollars.

So let's see if we win fifteen trades and lose fifteen trades, our total loss would be 120 dollars

multiplied by fifteen is equal to eighteen hundred dollars and our total profit would be 360 dollars

multiplied by fifteen is equal to five thousand four hundred dollars.

Hence what do we have in the final outcome.

Five thousand four hundred dollars minus eighteen hundred dollars thirty six hundred dollars.

We are still in profits.

So that 60 percent gain of our portfolio, which is absolutely phenomenal.

This is the power of low risk and high reward systems.

Let me give you another example.

So now let's suppose you're an average trader and you find it difficult to find a three hour trade.

Let's try it two to one risk to reward systems on the same amount.

So what happens after 30 trades with 50 percent accuracy?

Our portfolio size is the same of six thousand U.S. dollars.

We would risk two percent of the portfolio, which is 120 dollars are expected profit if take profit

hits would be to forty dollars an hour.

Expected loss if our stop loss gets hit would be 120 US dollars.

So after 30 trades with 50 percent accuracy, we want 15 trades and we lost 15 trades.

So simple basic math, 15 multiplied by 240 equals to thirty six hundred dollars and fifteen multiplied

by one twenty dollars equals to eighteen hundred dollars.

So we would subtract these two.

Hence the final outcome for us would be eighteen hundred US dollars.

So we are still in the profits even after losing 15 trades and we want 15 trades.

So this is the power of risk management.

Never good for the trades that have high risk and low rewards, we are here for trading.

We are not here for gambling.

Our main job as a professional trader is to manage risk, always risk one to two percent of the portfolio

portrayed in the beginning.

Consistency and patience is the key to success, grace and what all these social media and Instagram

gurus who are showing you a fake persona of trading on these social media gurus have planted a desire

of get rich quick scheme.

In your mind, there is no such thing, including everything is fake.

Trading is a career which is based upon patience, discipline, persistence and consistency.

These things are the key to success.

There is no point of trying fancy lines on the chart unless you have money to trade.

So that is why risk management is the key to success.

I have seen a lot of newbie traders who have blown and wiped out their trading accounts within the first

couple of days because lack of risk management and not taking good trades like low risk and high reward

setups in this building.

I have given you the example of three to one risk to the world ratio and two to one.

Now imagine if you take trades with one to one risk to reward ratio by winning 15 and losing 15 trades,

you would make no money.

All of your time and efforts would be wasted and you would be in some reduction due to the exchange

and trading fees.

So that is why I always go for low risk and high reward setups.

I hope this video was full of information and you have completely understood and understand the risk.

I hope.

I hope.

I hope you.

I hope this will use what I hope this video was full of information you have completely understood and

understand how to how to how.

I hope.

I hope this video was full of information and you have completely understood how to manage risk and

act as a professional trader and what to do and what not to do during your trading journey.

I hope you have enjoyed the video and you have learned.

Thank you, everyone.

Let's move on to our next picture.