Balanced Risk Example

Using risk and position management to compound gains

My lengthy and detailed explanations of risk management, balanced risk and risk management through position management can be tough to grasp when everything is new. Therefore, let us have a look at a simple example.

Here is a chart with a decent setup:

This is a risky setup. we can play for a higher high at the risk of rejecting and making a lower low instead.

The distance from the projected entry to the ‘knee’ is 2 points. How can we use risk management parameters to play this and protect ourselves?

First, we have to make to look at probability. In this case, H1 EMA9 is pushing price and we have an hourly uptrend. Here is a look at the same setup on the higher timeframe: