As you know, the size of your profit is directly connected to the amount of risk. If you want to get larger profits without increasing your capital, you will inevitably have to accept higher trading risks. It is self-evident.
In this article, I will study the issues of risk in trading. And not just simple risks, but the ones I deem high.
Read it to the end and you will realise how to turn high-risk trading into a risk-free deposit boost. Such option is included into Horizon trading system.
You will see what profit and during what period you can get applying Horizon risk-free deposit boost technique. I will demonstrate it using the trading statement of our trainee.
You can learn the details about this technique from our free Horizon TS training course. You can get all the video lessons if you follow the link below. Enter your e-mail in the registration field and you will immediately get the first Horizon lesson!
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How to consider high risk
There are two notions in trading: aggressive and conservative trading. Obviously, traders calculate aggressive risk or conservative risk in their trading. But every trader has their own numbers and percents in the head.
I define conservative trading for myself as 1 trading lot per $10,000 deposit balance or less.
Every trade must not exceed 2% of your deposit size.
If you have more lots or your risks are higher than 2% per trade – I consider it an aggressive trading.
You may ask: “Can I trade with such risks?”
Of course, you can. And you should. But you should also understand the consequences of such trading and diversify your risks – I will tell about it later. I will also tell about a few trading methods of risk diversification.
How to calculate risks properly
I can explain that in a single phrase. You should have smaller risk in favour of a larger profit.
Let’s do it on a $10,000 deposit example.
You have $10,000 on your deposit. A 2% risk on a $10,000 account is $200 per trade.
Let’s imagine that your first trade was losing - a stop triggered. You have $9,800 left on your account. The risk for your next trade is calculated using the new deposit size. It will be $196.
But to earn back the money that you lost on the first trade, you need to earn 2.04%, not 2%, because $200 is 2.04% of 9.800.
Now let’s see how we can distribute and diversify risks.
Diversifying risks in trading
Talking about trading risks in simple words, I can mention 2 things: risk distribution and risk limitation.
Let’s see how we do it on charts.
Option 1. Not a very good one. A trader trades conservatively. In a few months they can double their deposit. And then withdraw half the money from their account.
Then a trader increases trading risks significantly. They raise the lot by 10-15 times, risking the whole deposit.
It is a high-risk approach to risk diversification. Even if you have a few profitable trades using this method, a single losing trade is enough to waste your entire deposit and trigger a margin call.
Option 2. Involves classical hedging. Can be implemented by opening simultaneous buy and sell positions of large volume.
After the chart moves a few pips, a trader attempts to open the “lock”.
I’m planning to write a separate article about hedging and locks. For now, I will simply say that this option is more profitable and reliable than the first one.
Hedging is not limited to one pair. You can hedge your (high) risks trading on different instruments and markets at the same time.
Another risk diversification option is the distribution of risks among several trading instruments.
It means that you can allocate your calculated 2% risk ($200) to several trades, not one.
And now I’ll tell you about hedging option that I consider the best. It is an unequalised positive lock.
In Horizon trading strategy, it is the technique of a risk-free deposit boost.
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Horizon risk-free deposit boost technique
The core idea of a risk-free deposit boost technique is both simple and ingenious. Here’s how it works. Let’s take the GBPUSD trade on February 8, 2018. You can see the chart movement in the picture below.
What do we see here? The first trade is a long trade on GBPUSD. It’s volume is 1 lot. At that moment, our deposit was $12,437.
The stop-loss was 18 pips ($180). It doesn’t exceed 2% of our deposit. That allows us to enter the trade.
After entering, we keep this position open. If an opposite trading opportunity appears, we open an opposing position of an increased volume.
How do we calculate the size of the opposing order? We see that the pair went 120 pips in the first trade. We can open an opposing short position with a 10-pip stop. We divide 120 by 10 and get 12 lots.
After that we combine the TP of the first trade and the SL of the second one, so that we would get profit no matter where the chart goes.
If the pair continues to move north, the first trade will be closed by take-profit, and the second by stop-loss. The eventual profit will be 120+10=130 pips, or $1,300 in deposit currency. The result of the second trade is -10 pips. As we entered it with a 12 lot volume, it will be -10x12x10=-$1,200. The total result of both trades will be $1,300-1,200=$100.
If the pair moves towards the second trade, we simply take the profit, closing both orders manually following the market trend. The total profit is calculated in the picture.
You close the trade at the point where the price “draws” the entry in the direction opposite to the second trade.
The picture below demonstrates how Horizon risk-free deposit boost is implemented in the market.
Summing up everything, mentioned in this article, I will present a statement of a trainee of mine. He used a risk-free deposit boost in his trading. Thanks to that technique, my trainee managed to take his deposit out of deep drawdown. He went into this drawdown before he came to study at Forex Academy.
This statement is a vivid example of proper trading with high risk.
Thanks to the “risk-free deposit boost” technique of Horizon trading system, you can transform your high-risk trades into risk-free and increase your trading account balance significantly.
Get your free Horizon trading system here