 Hey guys this is Hydro from Xtrades and in this video we're going to be talking about progressive exposure and this is basically a risk management strategy. So what is progressive exposure? So progressive exposure is a risk management strategy where it basically involves gradually increasing the size of your positions as your trading account grows and as you're making progress in the markets right and this approach basically helps control risk and minimize losses and yeah so this is how it works right so let's say you start trading let's say you've been in cash for a while right so you're coming from cash and how do you want to start off your first so let's say you're starting off in cash and then you see a setup and let's say you risk 0.5 percent of your portfolio right so this is your first trade if this first trade works actually let's say you want to risk 0.5 percent of your portfolio and you see two setups right so you'll say let's do 0.25 risk on each so two positions the risk each right so this is so you're coming out of cash and you see two good setups and you want to risk 0.25 percent of your portfolio on each position and if these positions work then the next time you see a trade then you can up your size to one percent risk right so now you have let's say these two trades work and typically when you're swing trading you want to get a multiple on your risk right so if these two trades work then you're going to have 0.5 percent gain on each one so 0.25 is your risk and if you make two times that you're going to have 0.5 R on your reward right so let's say these two trades do work you're going to make 0.5 R on each trade and you will have one percent of your portfolio as a total gain right because you're going to make 0.5 from each trade so one percent total gain on your portfolio so this is financed risk now right so once you have some financed risk then is when you can start progressively increasing your exposure and the next time you see some setups you can take one percent a total risk right so that means now is 0.5 R for each position I would say you have two setups again now you can do 0.5 R for each position and yeah so this is basically how you increase exposure and once those start working then you can up to two percent risk but at the very max I don't I may so so very fundamental rule never risk more than one percent of your portfolio one percent per trade so this applies more to people that that have larger accounts and are trading stocks or shares versus options but this is very important make sure you're not risking more than one percent of your portfolio per trade so in these examples your risk is 0.5 percent and in the beginning you start off with 0.25 right but as you continually to progress you want to make sure that you never risk more than one percent one one percent is a limit and you never want to risk more than that so that's a very important rule and so the opposite can happen as well right so let's say you start off with two positions and they end up both failing so the next time you want to do 0.12 so if that feels then you want to do 0.25 R so two positions now and 0.125 so progressive exposure works both ways right so if things are working you want to up your exposure because you have finance risk right this is finance risk and if things are not working then you want to decrease exposure and this way as your account grows you're going to be compounding because your position size is going to be higher and higher right so you're going to see an exponential curve and when things are not working it's going to be an exponential curve as well but it's going to be your losses are going to get smaller and smaller because you're positioning size smaller and smaller right so this is why progressive exposure is so important so I'm just going to recap this just to make sure that I'm explaining it well it might have been a little bit confusing so I'm going to recap it one more time so you start off with so you start off in the market and you're 100 percent cash right and you see a few good setups in the market so you think all right I'm going to test the waters I'm going to try buying two positions or two setups and I'm going to risk 0.25 percent my total portfolio for each position right and if they work then if they both work and let's say you get a two to one ratio on it so you're making two times the amount so if you're risking five dollars you made ten dollars then you made two times your risk right so that's you made 0.5 percent of your portfolio on each trade so a total that comes to one percent of finance risk and since you have one percent of finance risk now you can up your exposure up to one percent so then that the next time you see setups you can go 0.5 on each trade so this way you are increasing your exposure while you're not risking much you're just risking your previous gains right so you're not these are these are completely risk free because you're just risking what you made on your previous trades and the other thing can happen where these trades don't work out your initial trades can fail and that and now if you see setups again now you want to be more careful because market condition is telling you that the setups are not working right so you want to be more careful first of all and then second of all you want to decrease your position size so that way you're losing less and less every time and this works because the market follows momentum right so when things work things tend to work for quite some time so if things are working then you can up your position size very quickly and make big gains but when things are not working you can make your loss is smaller and smaller and go down all the way up till you're back in cash right so this is how progressive exposure essentially works so you're starting off small you begin with a small position size and uh yeah and then you always have a predetermined stop loss in each trade so this is the maximum you're willing to risk on a single trade so that's going to be one percent for us every risk more than one percent and you want to make sure that you're taking good risk reward ratio so you want to aim for at least two to one but the more the better so three to one will be phenomenal and you want to be consistent with your position size so if you're if your position size are winning or if your trades are winning then you want to make sure that you're upping your position size and the same thing if they aren't working you want to you want to decrease your position size as well and this way you're allowed to reinvest your profits into your trading account allowing for exponential growth over time right and this is the whole point of progressive exposure and you can also regularly assess how your setups are working in the market so market conditions are not good this system will help you make your position size smaller and smaller and if things are working in the market and market conditions are good then you're gradually going to increase your position size and compound profits right and the emotional control is very very important when following this because sometimes you're going to see a few setups and you're going to feel formal right you're like oh this is going to be the one for sure and you want to up your position size but you really have to make sure that you're following your previous trades and seeing what the market conditions are like right so being emotionally disciplined is very crucial and if you want to avoid over leveraging or taking really large positions and yeah you always have to stick to your risk management rules and yeah that's pretty much it the key to progressive exposure is to make sure that you're make sure that you have a controlled and systematic approach to risk and um yeah that every system or every trader can adapt these principles based on their system so it's not like this only works for assuming trading or day trading right it works for everything it's just a principle that can be applied to any system or any strategy but yeah that's pretty much it thank you guys for tuning in and feel free to DM 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