Hi All

last week we made about $70 not a big amount but at least it is in the right direction.

Last week i mentioned to everyone that i am planing to add some funds to the account at the end of the month. I am not doing this to entice other people to do the same although you can if you want.

The reason for doing this is to manage our risk. I am not doing it so we can double our position size and profit more although if we manage our risk properly then soon it will be possible and safer to do so.
We have been trading way over leveraged so far and got away with it.

Now as we are doing ok and i'm a lot more confident in trading it is time to start managing our account properly. Even professional traders do not win every trade but they have water tight risk management rules which keeps them profitable.

We should not risk more than 3% to 5% of our account at any one time so as our account is tiny i am going with the 5% but if it was to grow large enough then we would drop down to the 3%

Here is an example of our past over leverage:
We need to give the market a little room to move when we enter a trade so our stop loss is 30 points which = $30 loss if we are wrong and you aim for at least 2 to 1 for profit so $60 profit if we are right but not always achievable because i work full time as you know and our trades are set up outside of working hours usually about 6 or 7am.

Starting balance £410 or $638
Trade size $1 per point. (We can trade less per point having a micro account but it would take for ever to move on at the current rate).

So 5% of 638 = 31.9   Which means from the start our stop loss could not exceed $31.90 and if you have a losing trade from there then this stop loss needs to reduce to stay within the 5% risk rule. Less than 30 point risk in our situation is pretty impossible to achieve.

So if our account was $1500 to $2000 we would not need to worry about our losing days at $1 per point per trade if we are about 50% right in our trades. This should help to keep every month positive.

Steve.