Risk Management or how we enforce Trader Discipline
At first many prospective traders who consider our Trader Trainee Programme think it is unusual to trade dollars for pips. They tell us that they are not accustomed to trading in this manner. They look at trades as a percentage of risk relative to the account size and they do not consider pips only. This may be true for very experienced traders. Unfortunately, all too often it is not true. In the past we ran conventional trader programmes with dozens of traders. These programmes allowed traders to trade straight accounts. Most traders failed, mainly for two reasons. Firstly, they could not calculate the appropriate lot sizes or limit the number of outstanding positions and then typically over-levered. This resulted in their blowing up the account before they had even started because they hit the draw-down limitations we had imposed as part of our risk management strategy. Secondly, traders simply did not manage their stops correctly. They committed the classic trader error: instead of cutting their losses short and letting their profits run, they let their losses run and cut their profits short. Some traders also followed losing ticky tick scalping strategies that did not work because their profit/stop ratios were incorrect, although they may have had a high win/loss ratio. By trading dollars for pips on our unique trading system, we eliminate these problems because we enforce a strict system of trading rules. In short, the approach changes a prospective or an existing trader’s mindset and forces the trader to think differently about trading. In our experience this unique approach significantly improves the results of most traders. Here are the key rules and attributes of our approach:
- Lot quantity sizes do not matter as the trader focuses on making pips. We manage the lot sizes, which are not seen by the trader, via our trade copy function. The trader only focuses on getting the pips.
- A trader can only have two positions open at any one time. Consequently, he or she does not hold over-levered, multiple positions. We have observed many traders who try to double down multiple times (some as many as ten times) – a strategy that inevitably blows up the account.
- We have imposed stops on each position a trader takes. In most cases when a stop is hit, the trader benefits because the imposed position stops protect him or her from even bigger losses on bad positions. Nevertheless, traders frequently complain about this feature.
- We add a slippage factor to each position, which, in a sense, makes the spread larger than the spread to which traders are accustomed. This approach discourages losing, ticky tick strategies and forces the trader to aim for better profit/loss ratios. It encourages the trader to stay in the trade longer. Traders often complain about this approach, but in the end they make more pips.
Traders who are looking for an approach that significantly boosts performance need look no further. Our approach generally improves a trader’s performance by between 20% and 30%. If you are close to being a break-even trader, this approach could make a significant difference to your strategy and success. If you are not close to being a break-even trader, we can assist you with other tools. Please review the educational aspect of our Trader Trainee Programme by clicking here.