Risk Management And Psychology

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๐Ÿ•’ 6:05 PM

๐Ÿ“… Apr 08, 2025

โœ๏ธ By 0xKpoya

Before you apply this, make sure you have a trading system that works, your win rate doesn't have to be high, Maybe 40% .

Out of 10 trades you know you can get at least 4 profitable trades and above,  then all you have to do is apply this plan below

NOW THE PLAN๐Ÿ‘‡

Let's say your Trades gives you an average Risk to Reward of 1:3 and above. 

Risk to Reward Ratio(RRR) is way of measuring potential profit to potential loss . 

Example: if you have a 1:3RR setup 
This means that if you are risking $100 per trade, your potential profit will give 3x of that $100, so if you lose the trade you lose  $100, you win and you get +300$ that is 1:3RR

So if it's a 1:5RR trade , you are risking $100 to make $500, and so on.

Now apply this to your trading account like this๐Ÿ‘‡
Let's illustrate this using $10,000 account
Trading just 1:3RR setups
With a win rate of 40% and a fixed Risk amount of $200 per trade. 

Now you took 10 trades , Worst case scenario You lost 6 trades and you won 4 trades , all of which were 1:3RR setups and above

If you Lost 6 trades 
your risk is $200 per trade 200$ x 6 = -$1200

You won 4 trades , each of this 4 trades were 1:3R trades, 3R x 4 = 12R
Your fixed risk is $200 so you have  $200 x 12R = $2400 profit.

At the end of the week you lost 1200$ from 6 trades and you made $2400 from 4 trades.

Now when you subtract $1200 from $2400 = 1200$

Your Account balance should be  $11,200, you have $1,200 profit.. sometimes you might even get a  1:5R setup and above, still stick to your $200 risk and Maximize your profit.

If you can maintain this consistently , follow the plan with Discipline see how you will become profitable overtime, regardless of your account size .