 Welcome everyone to today's session with me Patrick Munnally. We're going to be covering risk management this morning. I'd just like to do a quick audio test if you can hear me and you can see a screen saying Tick-Mill, we want traders to succeed. Could you type a Y in the chat box please? Can everyone see the chat box? Good stuff. Okay thank you. Right well we'll get started here in just under two minutes. Okay good morning, good afternoon or good evening depending upon where you're logging in from. Once again welcome to today's session with me Patrick Munnally. We are going to be discussing risk management in today's session and to that end we will just take a minute to read through our risk disclaimer. We all know that the trading foreign exchange is risky and by participating in these education sessions you are certainly helping to mitigate that risk for yourselves as you proceed through to trading. Like I say welcome. My name is Patrick Munnally and I'll just briefly give you an overview of who I am. After successfully co-founding and exiting a consulting startup I moved on to explore my passion for markets. I researched, developed, tested and implemented a robust trading plan and appinned by a rigorous risk management strategy. This plan has delivered profitable annual returns since 2008. Since 2010 I've personally mentored over 100 private traders of all experience levels from complete novices to former CME floor traders in developing trading strategies to reap consistent returns from the markets. I've consulted numerous brokers, trading education brands, contributing written webinar and live presentation content on a range of topics from market analysis to trading strategy development and execution. I'm currently the head of trading and trader education for a leading online trading firm called FX CareerSwap. I also manage a proprietary trading team for a firm called Littlefish FX and since 2013 I have not only been managing my own capital I've also been managing investor capital. So hopefully that gives you a flavour of where I'm coming from and now we'll move on to today's content. Before we begin what I would like to suggest is that as I cover today's topic if you do have any questions please make a note of them and I will open the floor up at the end of the content once I've covered everything I intend to talk about and I'm happy to answer any questions that you may have. So please just make a note of any questions hopefully you've got a notepad and a pen to hand as we as we go through today's content. So risk management making our trades profitable. Risk can be defined as a situation involving exposure to danger and everyone knows that trading forex is risky especially the people who trade on a regular basis. Traders are constantly trying to develop better strategies that will help them predict where the market will go with more accuracy. Risk a lot of people think is when the future doesn't do what we tell it to. We expect the market to go up but we risk the market going down. However risk is actually much more complicated than that and a lot more important to our investments. In fact risk is the very reason that stock markets and trading exist in the first place. Trade and investments certainly existed before mercantilism but it was during the 15th century when equity trading as we know it today actually began to develop. The major factor in developing trading houses originally investors who would get together in coffee shops in Venice, Genoa, London and Amsterdam was for helping investors cope with risk. Back then major trading involved spices from the Orient and futures on crops. Mills established the first form of futures by trying to guarantee grain supplies when farm output depended upon varying weather conditions. Millers would agree to buy grain from farmers at a predetermined price early in the season so that if there were early rains and grain crops spoiled causing a spike in the price of grain due to scarcity they could still afford to buy it. Farmers would sell their future grain to guarantee that they would still get a profit if the weather was especially good and prices fell due to extra production. Excuse me, therefore futures were created to help businesses cope with risk. Stocks and shares we trade today came from shipping. Although bringing spices, silk and other commodities from the Orient was very profitable, ships had a nasty habit of being taken by pirates or sunken storms. Sometimes shipments were delayed. If an investor put all of his money into one shipment he could make a lot of money but if something happened to the shipment he'd be completely ruined. To combat this traders would form companies that would spread out the risk of losing cargo so that if one ship sank it wouldn't ruin the business. Investors would have shares in the venture and eventually began to buy and sell the shares. Hundreds of years later we have advanced financial systems and institutions but the basics remain the same. Wall Street, the city, they're all based on instruments designed to reduce or manage risk. Failure to manage risk leads to bankruptcies, stock crashes and even world recessions. Therefore it is important for every trader to understand that risk is an inextricable and essential part of trading within the markets. Risk can never be eliminated therefore it must be managed. In popular media traders are often dismissed as gamblers who play with other people's money that's not entirely true. It's an accepted truism that says that the house always wins. What's the difference between the house and the gambler? The house practices risk management and the gambler does not. So do we want to be the house or do we want to be the gambler? Why do people put money in a bank? Because it will be safe there obviously. Also they might be looking to get some interest back given the economic conditions of today probably not too much interest but it could be a factor. And why does someone start a business? Well to make money of course as well as help out the community create jobs etc. Starting a business of course is very risky and the idea of the entrepreneur is to make more money than he's putting in. Now lots of entrepreneurs don't have enough money to start their own businesses and often have to borrow money from the bank but that's okay the business will make enough money to pay off the loan and still leave the owner with a profit. Of course the interest rate that the entrepreneur will pay for the loan from the bank will be higher than the interest rate the bank is paying them for depositing their money there. The bank is calmly pocketing the difference for doing nothing more than having an office with a sign that says bank above the door. So why should someone with extra cash not just loan the money directly to the entrepreneur? If they have extra cash and the entrepreneur needs the money to start a business surely they could make a much better profit than the interest they receive from putting their money in the bank. The obvious issue is that the money is safer in the bank. If it is a given to the entrepreneur there is the risk that the business might not be profitable as expected. It might even go bankrupt and in that situation what guarantee does the loaner have that the loanee won't just run off with the money? Most people are willing to make less money by depositing money in the bank because it's safer to have the money with the bank. There is a direct relation between risk and profit the riskier something is the more profitable it has to be to attract investors but what does this have to do with forex? Well the same principles apply the more money you want to make the more risk you have to take the more risk you have to deal with the more important it is to manage that risk. The bank in this example makes money solely by risk management it collects deposits from lots of people then loans out the money to lots of entrepreneurs at a higher interest rate by distributing individual risk through the system the bank manages the risk involved with giving out loans and provides security to the depositors. As an investor in the markets you want to move from being the person who deposits money in their bank to avoid risk to actually being the bank where you manage risk by investing in different currencies or equities and attain a higher rate of return the better you are at risk management the more risk you can take and the more profit you can make. So how do we go about mitigating this risk? Well one strategy is portfolio diversification the simplest form of risk management is to follow conventional wisdom and not put all your eggs in one basket or as the suits say diversify your portfolio. Of course this is a little more technical than it seems diversity in your portfolio is not about buying different currencies or equities but evaluating the relative risk of your options and distributing your investments in such a way that you have an acceptable risk to profit ratio. Now generally speaking by making smaller by making several smaller investments you have less risk than if you make one big investment. This is the principle behind banking banks run the same risk of their clients not paying them back each time they loan out money. By loaning to lots of people the risk is spread out over all their clients and it's easier to compensate for. For example say you have an investment opportunity it really doesn't matter what it is for every dollar you put in you could get back $10 and you can invest in it as many times as you want but of course there's always a risk that there's a 50 50 chance it won't work out which isn't at all far fetched 50% of startups go bankrupt in the first year. So if you put all your money into it you could become incidentally rich but if things go sour you could lose every penny you've got so is it worth it? That was a trick question that's something that gambler would consider. Traders should be applying risk management instead. The key here is that you can invest as many times as you want just like with the equity or foreign exchange markets. If you make one investment you have one chance in two of losing a 50% risk but if you win you get 10 times back that is expressed as a profit-to-risk ratio in this case you have 10 profit and risk 2 or 5 to 1 risk-to-profit ratio. If you split your money in half and buy twice statistically speaking one investment will lose everything and the other will pay off so if you invest $100 $50 in each in one you'll lose 50 but in the other you will make 500 a net profit of 400. If you'd invested all your money you could have made 900 but you could also have lost everything. The important thing here is that by splitting up the investments you're no longer in an all-or-nothing position which is gambling but in a position where it's much more likely that you will make at least some profit which we refer to as trading. Of course you can reduce some of the risk by using different techniques to try and figure out what will happen but you can never be certain of the future. Once you've minimized as much risk as you can by researching your investments you can then reduce the investment's risk by handling how you expose yourself to it. There are lots of nuances to improving your profitability by diversifying your portfolio and we will cover these in later sessions. Now I want to introduce you to an important concept that many inexperienced traders fall foul of and that's the gambler's fallacy. Financial experts and traders would like to dispel the myth that trading forex is similar to gambling. It's therefore annoying for traders to come across something that applies to both gambling and trading but if it will help them get a leg up on trading it might be useful to look into. The gambler's fallacy applies to a common misconception connected with statistics and probability. Traders use a lot of money but probability is very useful when evaluating your portfolio risk. Basically you're trying to figure out the probability of something happening. In trading it's either the market going up or going down. In this respect gamblers have an easy possibilities of what can happen are relatively limited. In poker for example there are a limited number of cards which make the probability calculations a lot easier. When trading with currencies or even stocks for that matter there are virtually infinite possibilities of what might disrupt the markets. This is why putting backstops in place to protect your portfolio against risk is very important. When trading forex you can boil down the risk to two possibilities. Markets either going up or it's going down. Granted there are a lot of factors that will influence the market whether it goes up or down or how far whether it's a panic, a sell-off or short covering. These factors can change the likelihood of whether the market will go up or down and you should invest accordingly but to make things simple to explain the general concept let's say that there is a 50-50 chance of the market going in either direction. Like say flipping a coin. If you flip the coin 10 times you might think you could expect the coin to land five times heads and five times tails so 50-50 odds. That's not true. That's the gambler's fallacy in assuming that there is a connection between the chances of the coin tosses. If you toss a coin three times and all three times it landed heads up you might think that the next toss will be more likely to land heads down but the reality is that each toss has the same chance of landing heads up or heads down regardless of how many times the coin has landed on each side previously. So how does this affect trading? Often this fallacy takes on a different expression in trading. Something like well the market's been going down for four days it's about to go up today or I've had three losing trades in the euro so far so the next one must be a winner. The chance of the market going in one direction or the other depends on the economic factors of the moment and it's not necessarily related to what has happened previously. That might get technical analysis a bit peeved but the important concept to understand here is that past performance has no effect on the chances of the market doing something. Consequently when you're analyzing your risk management strategy don't let what the market is doing affect how you make risk decisions no matter how sure you are that the market is going up or going down there is always a chance it will go in the opposite direction. So what we want to do is calculate our exposure through probability. When you make an investment decision you're going to do a lot of research to figure out what is the most liking scenario and figure out the probability of success. How much time you're going to spend thinking about failure? Hopefully not very much because if you dwell on the chances of failing you won't be optimistic about the investment. Good risk management is divorced from how likely it is that an investment will pay off. It's the annoying pessimist in the room always thinking of the worst case scenario but it is possible to turn that into profit. Again thinking about coin flipping as an example coins are great for these kind of examples because they are money and have equal chances of landing heads or tails. Well actually it's closer to 51 percent heads because that side of the coin has more mass. Yes someone actually studied that but sticking to the 50 50 percent chance it makes it easier for us to do the following maths. In this example we'll assume that we are betting on heads so if you win you double your money but if you lose you lose all of your money. If you bet on the flip of a coin when you have a 50 chance of winning and a 50 chance of losing but if you flip the coin twice how many chances do you have the coin will land on heads. Now again remember the gambler's currency the chances are still 50 50 for each toss. If it lands on tails in the first toss you still have another toss and then there is still just a 50 50 chance that it will land heads or tails. That means that the chance of the coin landing tails both times is 50 percent of 50 percent or 25 percent in other words your chance of losing all your money is only 25 percent. Your chance of winning is also 25 percent but your chance of breaking even is 50 percent. The amount of money hasn't changed and nor have the chances but by splitting your money into smaller amounts and making several bets you're statistically reducing your chances of losing all your money. So how does this apply to forex this has an even larger effect on currencies. Usually when traders make an investment in the currency pair they can put a stop loss level. This means that the broker will automatically sell the investment if it drops to that level. Traders can get a stop at a fraction of the expected gains. For example if you expect an asset to gain 10 pips you can set an order at 10 pips. This means you are risking 10 if it goes up by 20 pips. Bear in mind that when the markets do sometimes spike dramatically these numbers are excessive and are purely to help you understand the mechanics. If we put all our money into one investment you could either make 10 or lose 10. If however you split your money into two investments one after the other the chances change dramatically. Notice that by splitting your investments you now have a 75 percent chance of making some profit and only a 25 percent chance of losing. Significantly this is without changing any of the variables that you made to choose the investment in the first place. Simply by managing your risk through probability you can make your portfolio more profitable in the long run. Of course there are a lot of factors that influence these outcomes in the real world but the basic concept to spread risk through smaller investments. There are ways to calculate the ideal exposure which will be covered later but an important topic to understand is that of variance. An often ignored factor in investments that's particularly relevant to overall portfolio management and also touches on how to deal with risk. The term variance is borrowed from game theory which studies how to optimize different winning and losing scenarios. Variance is also very common concept among professional gamblers and although there is a clear and definite difference between gambling and investing some of the risk mitigation tools from gambling can be useful while trading currencies. Basically variance deals with how money is made and lost during investing. Understanding variance requires accepting an important concept of trading. No one ever finishes in the money all of the time. Eventually everyone is going to have losing trades. This is completely normal sometimes there'll just be individual trades sometimes they will be part of a series of losing trades but ultimately a successful trader realizes this and can take steps to help mitigate that risk. Understanding how these gains and losses cause a portfolio to vary in size is the basics of a variant study. A study by a major retail trading company found that on average traders were right about 64 percent of the time. The normal distribution was between 60 and 70 percent of winning trades. Excuse me this means that the normal average trader is going to lose money 30 to 40 percent of the time depending upon their skill. It's important to understand how likely it will be that you will have losing trades but the really important part of the study was the difference between profitable traders and non-profitable traders. They both had statistically speaking the same winning ratio. The difference was that profitable traders made more money on their winning trades than they lost on their losing trades. While unsuccessful traders lost more money on their losing trades than they made on their profitable trades. This is a very important fact in understanding trading psychology and success. The difference between a successful trader and a non-successful one is not necessarily better prediction of where the market is going but to have better risk management to ensure that losing trades don't take up too much of your portfolio. Once you understand that you have losing trades the question is how will that impact your portfolio. Losses have a bigger impact on your profitability than the equivalent gains. Therefore it's important to build a certain amount of cushion into any trading strategy in order to absorb normal trading variants. This is why traders are constantly studying past performance to understand how likely and frequent their losses are. This allows them to accurately measure their capital margin to account for variance. This cushion allows traders to absorb losses without changing their trading method. It's also important to understand that losses can come in runs where there is a series of trades ending in the red one after another. This can be quite stressful and besides being able to manage the money aspect you need to be aware of the psychological parts as well. Variance is determined by calculating how much is made and lost over time. For example you could have two trades that post gains and one that's the loss. This would be a 66% game ratio. This concept should not be confused with statistical variance. Statistical variance assumes data at a single time point but in trading variance occurs over time. In this case your variance will be 50% of your profitability. In other words for every one dollar that you make you are likely to lose 50 cents. So if you're expecting to make $1,000 over the course of your trading cycle you will need to consider having a $500 cushion to account for variance. Now unfortunately there is no way to predict a person's variance. Not only does it vary from person to person but really from strategy to strategy and from risk profile to risk profile. The best way that traders can manage this is to keep meticulous records of your trades and figure out for yourself how much your strategy can afford to lose in pursuit of your profit objectives. Determining the risk ratio. The concept of reducing portfolio risk by making investments of a smaller size we've already talked about. By spreading risk over several investments or trades traders can leverage probabilities so that more of them will pay off in the long run and you will make better profit. But what size should you be making your trades at? Luckily there is an ideal risk to portfolio size that traders can use to maximize profits. Ultimately each individual's risk ratio will depend on their particular investment goals and styles. There are some rules of thumb that can be applied for good starting place. Basically you need to balance two risk factors. Your individual risk against your portfolio risk. In the previous session we showed how investments with more risk offset by higher profit. That's why as a general rule it's best to take on as much risk as possible within a safe range in order to maximize your profit. On the other hand portfolios can be managed in a way that allows traders to reduce overall exposure. Making a risk investment less risky because the risk management strategy helps to mitigate the effects of an adverse outcome in the markets. Portfolio risk can, like I say, be mitigated by reducing your overall level of risk. You're essentially creating more portfolio value. This allows traders to either take on more profitable investments at higher risk and make more money or to have more security with the portfolio and invest more in it. The other factor you need to consider is liquidity because when you have an adverse market performance this has a larger impact on your portfolio than a positive outcome. For example let's say the market can go up 10% or down the exact same amount. If you start with $100 and the market goes up you've made $10 and your portfolio is now worth $110. On the other hand if the market goes south you lose $10 and your portfolio is now only worth $90. That's too bad but maybe you can make 10% profit next time. Let's say that you do 10% of 90 is 9 which means that after losing one and winning one trade you now have $99. That's $1 less than you started with. This is how losing has a bigger impact on your portfolio than winning. Your portfolio has lost value. If a trader can either win or lose 10% and has 50-50 yards on winning he will lose $1 on average with each two trades and eventually his portfolio will reach zero. This is why taking a 50-50 risk on an investment that will only double 100% your money is not a good idea. You need to have more than a one-to-one risk-reward ratio either by having more than 50-50 odds of your trade working out or you're winning more than 100%. Considering these two factors it is possible to work out a likely ratio of how much of a portfolio should be risked at each investment. Keep in mind that this will vary depending upon the trading strategy and that it applies to investments that have more than a one-to-one risk-reward ratio. The smaller the percentage of the portfolio the less risk but on the other hand the less profit that can be made. You could also use complex computer models to find the exact ratio but fortunately someone has already done the work for you. Many retail trading companies survey their traders and their trading habits and after analysing millions of trades and billions of trades they found that the most profitable risk percentage is just under 3%. If you risk less than 3% of your portfolio per trade then you don't have as much profitability but if you invest more than 3% the liquidity problem where losses have a bigger impact than gains asserts itself. This doesn't mean that you should invest only 3% of your portfolio and leave the rest untouched in your account. It means that for the each risk scenario you should only risk 3% of your portfolio to ensure maximum profitability. This could mean that you risk 3% in one stock you're expecting to hear news about while another 3% could be invested in long-term bonds and a further 3% could be in gold. Eventually you will have as much of your money as possible working in the market but you need to diversify your portfolio's risk profile in such a way that you are not subject to losing more than 3% in any one position. Now before anyone starts trading it is vital for them to determine whether they can afford how much risk capital they can afford to use in the market. You really need to ask yourself how much money can I trade with and whether you can afford to lose that money. Trading should only be done with risk capital money that you can afford to lose. Of course no one is ever happy about losing money but at least they're not losing the cash that's needed to pay bills or the rents. No one should be trading with their life savings. Obviously they won't want to lose their savings but it's also important to realize that from a trading perspective the high risk element of using this money to trade with will have an undoubted impact on your ability to make objective trading decisions. Fortunately FX trading has progressed to a point where demo and small accounts are available and easy to set up. This is very beneficial to new traders allowing them to play and practice systems and plans until they are truly ready. One word of advice though as soon as you are familiar with a trading platform open up a small account instead of staying too long on a demo account. Trading real money is a lot different to trading demo money and you can get a lot of false hopes through continually trading on a demo account. Risk management this is probably the single most important concept in trading and therefore in any trading plan as we discussed in last week's session. Risk management is the concept of protecting capital to ensure you can a trade again the next day. It is also key to creating profitable strategy and becoming a consistently profitable trader consistency being the key word. Often people describe money management in terms of utilizing a set percentage of an account or even ensuring that the profit target is larger than the stop-loss. In fact the key to money management and risk management is actually understanding your strategy and trading style intimately. Assuming you can consistently apply a given strategy and know its average win ratio and as long as you are then able to apply stop losses and profit targets in the same way for each trade you can be certain of being a profitable trader. As you can see on the screen if a strategy wins 90% of the time on average then the trader can utilize a risk to reward ratio of anything greater than 9 to 1 to be profitable i.e. a 10-pip profit target on a 90-pip stop loss. However if a strategy wins 25% of the time then the trader needs to utilize a risk to reward ratio of at least one to three in order to be profitable. So a 75-pip profit target for a 25-pip stop loss. The challenge here is understanding how accurate or profitable a strategy is. The easiest method for doing this is back testing using computer simulators to work the statistical properties of a trading strategy. But in reality know-how and good data and good software are required to do this accurately. Therefore most traders will need to keep a track of their own trading in order to build a longer term view on how well their trading strategy is working out. Again the importance of a trading journal as we discussed last week is one of the reasons that a record of your trades is so important. A log of not just your motivation for the trade but also the setup you stop loss and the profit target will enable you to learn from your own experience and optimize your money management for your own trading plan your own trading style. At the end of each week and at the end of each month you should review your trading log looking to see how close you stay to your trading plan. Whether your stop losses and profit targets are in the right place then using this information and the charts of the trades you took you should be able to amend your trading plan and money management techniques to ensure that in future positions you're able to better maximize the trades and therefore your trading potential. Using a small trading account you can build up your experience work out which strategy fits your personality and work out a good money management system for your specific trading plan. You've got to stick to your guns. Once you understand your risk to reward ratio you need to absolutely adhere to your plan. Don't move stop losses and profit targets around unless there is a predefined reason in your trading plan. All good traders stick to their trading plan and let the market come to them not the other way around. This is very difficult to learn but the majority of reasons why traders fail is that they move stops out and profit targets in. This means that instead of sticking to their money management plan they take profit too early and stop out of trades too late. So we've got to understand our strategy in detail. We don't want to get bogged down by the various people telling you that you need two to one or x percent of your account on each trade. Do your homework by keeping a trade log by keeping a log of all your trades. Convert percentage profitability to a risk reward ratio. This will give you the multiple of your profit target to stop loss size. Once you've set your stop loss and profit target don't chase the market. Never ever move stops. Remember you don't have to win 90% of trades to be a great trader but you do need to be consistent. Let's look now at some examples of risk reward of risk versus reward in action. As an example consider a trader who always looks for at least two times what he risks. A key point on the trading plan therefore if his stop is 80 pips he is looking for at least 160 pip profit on a trade. If his stop loss is 10 pips he will be looking for at least 20 pips. This is because he knows that on average he's right about 40% of the time. Therefore in mathematical terms his average profit is 40% of 160 pips minus 60% of 80 pips. Equalling 64 pips minus 48 pips which gives a 16 pip net profit. The simple rule is key to trading. If you have a negative position on average you're going to lose money overall. Look over your trades. Work out your average stock size and profit target and the percentage of times that you hit your stop versus hitting your profit target or the trade being closed. Then do the simple maths. Quite simply are you profitable? Remember when doing this you need to ensure your lot sizes were the same otherwise it becomes skewed. For example if a trader was trading a micro account that's 1000 per lot and took two lots per trade and closed one at 80 pips and one at 160 pips the equation would be slightly different because then what we've got is 40% times 160 plus 80 divided by 2 which you have to subtract. 60% times 80 equals 48 minus 48 which gives and then flat. So even though strategy is there are winning trades your actual returns would just be zero. One of the greatest tricks to trading but one of the hardest to learn is letting your winners run. The best way to do this is to take two-thirds of the trade off at two times reward per your risk. Then trail that last third for instance let's say you're trading a micro account you enter your trade for three micro lots place your stop at 80 pips for all three micro lots and place your profit target at 160 pips for two of those micro lots. If you hit your profit target you've closed out two-thirds of your position for 160 pips then move the stop loss up to 80 pips profit and then leave the trade alone. Every time it increases move the stop loss up another 80 pips. So initially when we look at the maths with this strategy we calculate the average if your position retraces from the profit target when you've moved your stop to plus 80 pips. So now what we've got is 40% of 160 plus 160 plus 80 divided by 3. Take away 60% times 80 equals 53.34 minus 48 which gives 5.34. Then think about what could happen if you trail your stops higher if the trade actually runs up and you get stopped out on the final third at plus 160 your initial target 160 pips as well that's actually a net gain of 320 pips. You're starting to see how quickly you can increase your average with a few good trades that continue in your initial trade direction. Final trick to employ which many people find hard to do is adding to your position. Say you're in a trade and you need to see three moving averages cross in order to go long. Take your initial long position with three micro lots using your 80 pit stop. You take two-thirds of your trade with a limit order to take profit at plus 160 pips and the final third being trailed at 80 pips. If you hit your target at 160 pips and then there is a small retracement and you get another entry signal when the three moving averages cross over again it may seem obvious but what you need to do is to take the trade again as if you didn't have a trade on in the first place. In other words you go long again three micro lots and place your stop at 80 pips still trailing the other stock. Place your your two micro limit order at plus 160 pips and then look to trail the final micro lots. This is the way if there's a continued trend you can continue to build a bigger position so that when the trade does finally reverse all of your one third trailing stops that are in the money gets stopped out but that will be for a considerable gain. Applying these simple rules can turn anyone from a losing trader into a great trader. The key is to stop trying to be right and start focusing on being profitable. A lot of traders seem to aim for silly win rates with many aiming to win 90 of the time but there aren't many wealthy or successful traders with really high win rates. The greatest traders have fantastic patience and money management rules and do not go for 90% win ratios. The main reason being that these ratios put a lot of pressure on the individual and getting 90% win rates most likely involves taking incredible amounts of risk on losing streets. It is essential that we find a profitable strategy. There are typically two main issues here the first is the trader that has bought lots of courses and systems but is still failing. The truth is some of these courses and systems will be curve fitted for a very specific environment. One in which it worked well initially but now no longer performs but secondly there will also be a fair few of these courses that do actually work meaning the challenges with the trader. More often than not the best systems evolve around market principles that is that the underlying order book, support and resistance, supply and demand and price action. There are far more incredibly successful traders who use these concepts than any other. The reason for this is that these concepts are derived from the underlying order book and money flow in the market. Remember that the market is a series of opinions of what fair prices and these opinions can get turned into orders within the market but the issue with most individuals is their ability to pull the trigger and stick to the trading plan. The key here is that traders are driven by fear. The old fight or flight instinct built into us all is no different in trading and this impacts most traders in some way. The crucial issue is how you deal with it and this is why as we discussed last week the trading plan is an essential tool to overcome that problem. Fortunately there are a number of handy rules to stick to in order to avoid falling down the common trap. Set and forget once a trade is set along with the stop loss and profit target based on sound money management rules walk away and don't come back to the screen for a specific amount of time go and watch a movie, get a coffee or take the dog out. Remove all notion of money from trading platforms. One look at relative performance and pips whilst trading. If you have good money management and a profitable system you will be profitable in the long run therefore ignore the size of the account you're trading with. This puts everyone on a level playing field whether you're managing several million dollars or just fifty thousand or even five thousand but essential have a trading journal having to objectively write down why you're taking a trade along with the risk reward and trading components make you really think objectively about the trades you're taking and how to ultimately manage your risk. Okay guys that concludes the content that I wanted to cover today with respect to risk management. If you have any questions feel free now to type them into the chat box and I will happily try and answer any questions you might have. Abid I always forget to join can I get your old? Yep the webinars are recorded Abid and you can access them through the tick mill site so don't worry if you missed the start or you missed last week the series is recorded and you will have access to those recordings through the tick mill site. Next time please can you do the webinar with subtitles? I'm not sure I'll have to I'll have to find out from the technical team if we can do that Ahmed hopefully we can. The link if you contact Abid if you contact your customer service manager I'm sure they will be able to provide you with the link I don't actually have the link to hand myself at the moment. Alternatively you can connect with me on LinkedIn here's my there are my details my LinkedIn details you can connect with me and I'll get a I'll get a link and I can private message that to you or I will get I'll get the guys to to put up a link for you. Psychology how does it play out again like I was just saying it's that old the old adage of fear and greed essentially Aruna are the biggest sorry Francis are the biggest issues but the way you the way you can really compensate and mitigate that that challenge is by having a robust trading plan that's written down that's next to your your trading terminal and so you follow your plan meticulously that's the best way to overcome the psychological issues and also keeping a trading journal a trading journal not just about your setups and your strategy but also your psychological response to the market because over time you will realize that there are certain responses that you have that are based around negative emotions so again fear or greed that are that don't serve you well in the markets but then there are some like subconscious pattern recognition which over time as you become a more skilled trader is actually a tool that you want to take advantage of I was advised before scaling and actually work and becoming yet you can the the trick there Aruna is not to average down on a losing trade you can certainly scale in and out of trades but what you don't want to do is average down on a losing position that's the sure way to to blowing up your trading account the risk reward strategy I suggest Mohid that you rewatch the the recording of the of today's webinar and take your time going through and and causing the video making notes and that is probably the best way of getting a better understanding essentially what you're looking for really is once you understand that you're not going to be winning 100% of your trades or even 90% more likely than not it's going to be somewhere in the 40 to 50% range once you get once you become more skilled then the way to be coming profitable over a long period of time is making sure that your risk reward ratio gives you at least a 1.5 or 2 to 1 or 3 to 1 so whatever you if you risk one you want to make 3 that's how you'll become profitable over time any other questions at this stage guys okay if there aren't any other questions I'll wrap today's session up here I hope you found it useful if you do have any questions you can connect with me on LinkedIn I'll answer questions the best I can and I'll also make sure that we have the links up for the recordings of this webinar series so that you can access them through the Tickmill blog on the Tickmill website so thank you very much for your time today and I hope you found this content useful and I look forward to seeing you all again next week thanks very much guys