Forex trading proper risk management

 

XAUUSD $500 Account Management Plan

1. The Math of Your Setup

With a 38% win rate, you will lose roughly 6 out of every 10 trades. To be profitable, your "Reward" must significantly outweigh your "Risk."

• Risk per Trade: $18 (3.6% of $500 balance)

• Daily Max Risk: 6 trades x $18 = $108 (21.6% of account)

  • Warning: Losing all 6 trades in one day would drop your account to $392.

• Required Risk-to-Reward (RR): To break even at a 38% win rate, you need a minimum RR of 1:1.65. To actually grow, you should aim for 1:3 or higher.

2. Managing the 0.02 Lot Size

On XAUUSD, a 0.01 lot size equals $0.10 per pip. Therefore, a 0.02 lot size equals $0.20 per pip.

• Stop Loss Calculation: $18 risk / $0.20 per pip = 90 Pips ($9.00 Gold Move).

• Your Stop Loss (SL) must always be exactly 90 pips from your entry to maintain your $18 risk.

3. How to Capture "Big Profits" (The 1:5 Strategy)

Since your win rate is low (38%), you cannot afford to take "small" profits. You must ride the trends.

A. The "Runner" Technique

Instead of closing the whole 0.02 lot at your first target:

1. Set Target 1 (1:2 RR): At 180 pips ($18 move in Gold price), close 0.01 lot ($18 profit).

2. Break-Even: Move the Stop Loss of the remaining 0.01 lot to your Entry Point.

3. The "Big Win": Let the remaining 0.01 lot run for a 1:5 or 1:10 RR. Use a Trailing Stop based on the previous H1 (1-hour) candle's low/high.

B. Time Your Trades

Gold moves most during the London/New York overlap (13:00 - 17:00 GMT). Avoid trading the 6 trades spread across the whole day. Pick the 2 most volatile hours and look for "Breakout and Retest" setups on the 15-minute timeframe.

C. Use High-Probability Zones

Only enter trades at:

• Daily/H4 Support and Resistance: Gold respects these levels heavily.

• Psychological Numbers: Prices ending in .00 or .50 (e.g., 2050.00).

4. Crucial "Survival" Rules

• The 3-Loss Rule: If you lose 3 trades in a row, STOP for the day. Do not take all 6 trades. This prevents "Revenge Trading" and saves your remaining $54 for the next day.

• News Filter: Never open a new trade 15 minutes before or after high-impact USD news (CPI, NFP, FOMC). The 90-pip SL is too tight for news volatility and will likely get "slipped."

• Weekly Goal: Aim for 5-10% growth per week. Once you reach $600, keep the $18 risk but your % risk drops to 3%, making your account much safer.