Direct from the desk of Dane Williams.
With sound risk management at its core, yes, any forex trading strategy can make money.
For me, (within reason of course), the trading strategy itself that you choose to use, really doesn’t matter.
Almost any trading strategy can be profitable when traded correctly.
A skill that as you’ll see in this particular blog post, most importantly encompasses astute risk management principles.
Let’s talk more risk management in forex
Regrettably, this stark reality of forex trading stands - That a staggering 95% of forex traders lose money.
Why?
Well, the primary culprit often boils down to your blatant disregard for proper risk management when you trade.
Trading is never merely about finding the perfect entry and exit points that will catch an entire move.
Much more importantly, it's about safeguarding your capital through disciplined risk management strategies.
Every successful forex trader I've encountered has one fundamental trait in common.
They prioritise risk management above all else!
They have an understanding that while market conditions and thus their trading strategy itself may fluctuate, the principles of risk management remain steadfast and non-negotiable.
It’s literally all that matters when it comes to making money.
For me, simply incorporating closed risk and open reward into your trading strategy cannot be overstated.
By adhering to this principle, you ensure that your risk-to-reward ratio always tilts significantly in your favour.
Even if your win rate hovers on the lower end, your winners outweigh your losers.
Substantially!
This proves to be a pivotal factor in sustaining profitability over the long haul.
Makes sense?
Well, let me delve a little deeper into this concept for you.
Picture a scenario where your trading strategy boasts a modest win rate of, say, 40%.
On the surface, this might seem disheartening and like you’re obviously going to lose money if you trade it.
However, when coupled with a risk-to-reward ratio that favours open reward and capped risk, the dynamics shift dramatically in your favour.
Here's how it works.
For every trade you execute, you risk a predetermined amount of your capital, adhering strictly to your risk management parameters.
Simultaneously, you wait for the market to set your profit target at a level that far exceeds your initial risk, aligning with the open reward component of your strategy.
As a result, even if the majority of your trades end in losses—a plausible scenario as all traders take losses and taking a loss in forex is actually a win—the gains from your winning trades substantially eclipse your cumulative losses.
Forex trading is a game of probabilities, where the odds tilt decisively in your favour by virtue of sound risk management practices.
Risk management will always trump your trading strategy
In my opinion, the key to unlocking consistent profits in the forex market lies not in chasing after elusive strategies or quick fix solutions.
Instead, it hinges on mastering the art of boring old risk management.
So, can any forex trading strategy make money with sound risk management?
Without a shadow of doubt, the answer is yes!
Best of probabilities to you.