Safety First: How to Maximize Profits and Minimize Risk
TradeSmart University
Safety First: How to Maximize Profits
and Minimize Risk
Q: Do 90% of traders really lose their money?
A: No. Only 65% of non-professional traders lost money in Q4 of 2014*
Source: http://forexmagnates.com/exclusive-q4-2014-us-forex-profitability-report-accounts-fall-profits/
Not bad when you consider 59.78% of large cap managers, 57.84% of mid-cap managers, and
72.79% of small cap managers under perform their benchmarks for 2013-2014.
Source: http://us.spindices.com/resource-center/thought-leadership/spiva/
So what’s the difference?
• Professional Traders live to trade another day.
• Non-Professional Traders tend to go broke.
Overview:
• The non-professional Challenge
• Reward/Risk
• Risk Per Trade
• How you can learn more
www.TradeSmartU.com
PAGE 1
©2015 TradeSmart University, LLC
Safety First: How to Maximize Profits and Minimize Risk
TradeSmart University
The Non-Professional Trader Challenge
The Challenge
• Everyone wants to make money
• Losing trades take money away
• Feel that better analysis will increase wins
• Make a lot of winning trades but still see overall account balances going down
The Result: A feeling of exhaustion after working so hard to learn to trade but not seeing the
results they want.
How many winning trades vs. losing trades do you think are needed in order to make
more money than you ever dreamed?
• 4/10 (40%)
• 5/10 (50%)
• 6/10 (60%)
• 7/10 (70%)
So why are you not making more
money than you ever dreamed?
• 8/10 (80%)
• 9/10 (90%)
We have found through surveys that many of our TradeSmart University students are GREAT
analysts - consistently getting 60-80% of their analysis spot-on-perfect, they place good trades,
and they make money but over time lose more money than they make.
How?
www.TradeSmartU.com
PAGE 2
©2015 TradeSmart University, LLC
Safety First: How to Maximize Profits and Minimize Risk
TradeSmart University
Risk/Reward
Judy’s January Trades
Trade #
Gain/Loss
Starting account balance
Account Balance
$4,000
Trade 1
$2,200
$6,200
Trade 2
$321
$6521
Trade 3
-$760
$5761
Trade 4
$220
$5981
Trade 5
$105
$6086
Trade 6
-$1,900
$4186
Trade 7
$800
$4986
Trade 8
$25
$5011
Trade 9
$1,100
$6111
Trade 10
$650
$6761
Trade 11
-$2,100
$4661
Trade 12
-$800
$3861
Judy needs to learn to manage her Risk/Reward (Rs)
www.TradeSmartU.com
PAGE 3
©2015 TradeSmart University, LLC
Safety First: How to Maximize Profits and Minimize Risk
TradeSmart University
Trading the Rs
• The key to success is managing how much RISK you take
relative to the REWARD
• If you risk more than $1 to make $2, you will go broke
every time.
• Great professional traders know this secret.
If a trader places 5/10 trades to their target...
R:R
.5:1
1:1
2:1
3:1
4:1
5:1
Wins
$2.50
$5
$10
$15
$20
$25
Losses
-$5
-$5
-$5
-$5
-$5
-$5
Gain/Loss
-$2.50
$0
$5
$10
$15
$20
www.TradeSmartU.com
PAGE 4
©2015 TradeSmart University, LLC
Safety First: How to Maximize Profits and Minimize Risk
TradeSmart University
With Rs Trading
• Traders profiting on 40% of their trades will still make good returns
• Traders making 60% of their trades profitable will make a lot of money
• Traders making 70-80% of their trades for profit will make a ton of money!
Benefits of Rs Trading
• #1 - Removes emotion of risk
• Predictable system for making money
• Very forgiving to less than perfect analysis
• Allows you to stay in the game longer
• A revolutionary way to PUT MONEY IN YOUR POCKET
Cindy’s January Trades
Trade #
Gain/Loss
Starting account balance
Account Balance
$4,000
Trade 1
$400
$4400
Trade 2
-$200
$4200
Trade 3
-$175
$4025
Trade 4
$520
$4545
Trade 5
$300
$4845
Trade 6
-$190
$4655
Trade 7
$600
$5255
Trade 8
-$25
$5230
Trade 9
-$185
$5045
Trade 10
$850
$5895
Trade 11
-$200
$5695
Trade 12
-$100
$5595
www.TradeSmartU.com
PAGE 5
©2015 TradeSmart University, LLC
Safety First: How to Maximize Profits and Minimize Risk
TradeSmart University
Cindy’s Difference
• Limited Risk
• Manages her risk/reward ratio
• More predictable results
• 39% profit vs. 3.5% loss
• Cindy is trading the Rs system
• Sleeps much better at night
When you learn to manage your reward/risk ratio your profits will soar.
www.TradeSmartU.com
PAGE 6
©2015 TradeSmart University, LLC
Safety First: How to Maximize Profits and Minimize Risk
TradeSmart University
Risk Per Trade
• Everyone agrees: Do not risk everything on one trade - this is trading suicide
• The less you risk the longer you can trade
• How much?
➡ 5% of your account per trade (higher)
➡ 1-2% of your account (ideal)
How Long Can You Trade?
Account Size
$20,000
$10,000
$5,000
www.TradeSmartU.com
Risk percentage
Risk per trade
Trades You Can Lose
On Before Broke
5%
$1,000
20
2%
$400
50
1%
$200
100
5%
$500
20
2%
$200
50
1%
$100
100
5%
$250
20
2%
$100
50
1%
$50
100
PAGE 7
©2015 TradeSmart University, LLC
Safety First: How to Maximize Profits and Minimize Risk
TradeSmart University
Trade #
Account Size
Risk percentage
Risk per trade
1
$10,000
5%
$500.00
Capital Balance after
loss
$9,500
2
$9,500
5%
$475
$9,025
3
$9,025
5%
$451
$8,574
4
$8,574
5%
$429
$8,145
5
$8,145
5%
$407
$7,738
6
$7,738
5%
$387
$7,351
7
$7,351
5%
$368
$6,983
8
$6,983
5%
$349
$6,634
9
$6,634
5%
$332
$6,302
10
$6,302
5%
$315
$5,987
11
$5,987
5%
$299
$5,688
12
$5,688
5%
$284
$5,404
13
$5,404
5%
$270
$5,133
14
$5,133
5%
$257
$4,877
15
$4,877
5%
$244
$4,633
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
$4,633
$4,401
$4,181
$3,972
$3,774
$3,585
$3,406
$3,235
$3,074
$2,920
$2,774
$2,635
$2,503
$2,378
$2,259
$2,146
$2,039
$1,937
$1,840
$1,748
$1,661
$1,578
$1,499
$1,424
$1,353
$1,285
$1,221
$1,160
$1,102
$1,047
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
$232
$220
$209
$199
$189
$179
$170
$162
$154
$146
$139
$132
$125
$119
$113
$107
$102
$97
$92
$87
$83
$79
$75
$71
$68
$64
$61
$58
$55
$52
$4,401
$4,181
$3,972
$3,774
$3,585
$3,406
$3,235
$3,074
$2,920
$2,774
$2,635
$2,503
$2,378
$2,259
$2,146
$2,039
$1,937
$1,840
$1,748
$1,661
$1,578
$1,499
$1,424
$1,353
$1,285
$1,221
$1,160
$1,102
$1,047
$994
www.TradeSmartU.com
PAGE 8
©2015 TradeSmart University, LLC