Module 3: Risk Management and Psychology
In this final module, we’ll explore advanced risk management techniques and trading psychology. You’ll learn how to use layering, lot sizing, and set realistic trading goals to maximize your profits while minimizing risks. By the end of this module, you’ll have a solid foundation to trade confidently and consistently.
📈 Layering
Entry by Layer is the easiest way to control or manage our risks. Wait what?! 🧐
How can layering control or manage our risks? Weird right? Usually when layering, the risks would always increase, no?
You think of it that way because you don’t know the real technique to layering. I will share tips on how to layer the right way. Not just opening positions randomly!
📉 Lot Sizing (Money Management)
Lot sizing is the most important element in trading. It happens to be the biggest factor that many new traders tend to ignore.
Most newbies will randomly key in the sizes like they’re kings with an unlimited budget. Your lot sizes will determine many aspects in trading like how to layer, your profits, and your losses.
Entry & Layering! (Martingale Layer)
- This layering technique is called the Martingale Layer. Martingale layering entry is one of the best ways to manage your risk.
- For starters, choose the right lot sizes. Let’s say you have $200 equity in your account. Pick 0.10 lot as it is in between low and mid risk.
- Once the signal is out and you want to enter, the mindset has to be to fulfill your 0.10 lots by layering. So first, enter the smallest and cutest lot of 0.01 or 0.02.
- When the price is floating negative 5/10 pips from the open/entry price, add the layers and increase the total lots from the small one you entered initially.
- When the price floats further in the range of negative 20 pips from the open/entry price, add your positions to fulfill the total of 0.10 lots by entering the final layer with a bigger lot size of around 0.07 or 0.05 lots.
- Only layer 2-3 times to avoid over-layering.
- If you hit SL, your losses are minimized compared to entering the market with 0.10 lots in your first entry.
- If you're profiting, your profits will be much bigger compared to if you were to enter the market with one trade of 0.10 lot as your first entry.
Do you see how to manage your risks with the Martingale Layer? 😎
Lot Sizing Tips (Money Management)
- $100 Capital
- High risk = 0.20 lot
- Mid risk = 0.10 lot
- Low risk = 0.01 lot
- $200 Capital
- High risk = 0.40 lot
- Mid risk = 0.20 lot
- Low risk = 0.02 lot
- $500 Capital
- High risk = 1.00 lot
- Mid risk = 0.50 lot
- Low risk = 0.05 lot
- $1000 Capital
- High risk = 2.00 lot
- Mid risk = 1.00 lot
- Low risk = 0.10 lot
Just an example! You need to feel comfortable with your own lot sizes.
What is Break Even (BE+)?
BE is a step to protect your capital or balance from experiencing any loss after making a profit!
Basically, making bits of profit while minimizing any losses when trading.
You can set your BE by shifting your SL to before price action.
You can see a sample from the image above. Left is for Stop Loss (SL), and on the right is once Break Even (BE) has been done.
May this information be of use to you and increase your knowledge 🙏🏼
TIPS!
- Set your daily target! Do you want to make $10, $100, or $1000?
- Be realistic with your target! Set a goal that suits your capital.
For instance:
- $100 account target!
- Daily $10
- Weekly $50
- Monthly $200
- $10,000 account target!
- Daily $100
- Weekly $500
- Monthly $2500
Once you hit your target, stop trading and enjoy life. Spend your time on other things that life has to offer. Just. Be. Realistic.
Rising Wedge and Falling Wedge
Timeframes I suggest to look for this pattern: M30, M15, M5.
Once you find this pattern, you can simply mark the pattern with 2 lines (one at the top and one at the bottom) as you see in the picture above, and then feel free to try to buy and sell this pattern.
Another suggestion here is to identify the trend in a higher timeframe (e.g., H4) and then go for only this direction to reduce the risk.
Remember that a Rising Wedge tends to end up in a strong drop. And the opposite goes for a Falling Wedge—this most likely ends up in a Rocket. As long as this has not happened, feel free to try out your entries.
Quick Quiz
Based on this structure, what would you do?
The answer: Buy because of the breakout-retest pattern is correct, as you can see here we had a breakout upwards, a re-test, and now we're going to buy! Look at this!
Congratulations! 🎉
By now, you should have a strong foundation in gold trading, from setting up your account to executing trades with confidence. Keep practicing, refining your strategy, and staying informed about market trends.
I hope you found this guide valuable and that it helps you take your trading to the next level. Happy trading! 🚀