The most obvious way to limit risk is typically overlooked completely, but I don’t want you to fall into that camp. Each trade and each setup we run across is a little different than the next – no two are the exact same. So, it’s important to level the playing field a bit when it comes to our risk per trade.
There’s a simple equation I use for each trade. It’s not to determine my entry or exit levels, because remember in the last video that the chart provides that for me. What this formula does is tell me the correct position size for the setup I’m considering.
(In case you missed them, here are links to Part 1 and Part 2.)
Here’s Part 3 on stops. Click the full-screen button in the player for best quality: