Trader Dale Volume Profile

Money management
Let’s say that you are willing to risk 2% of your
entire account balance per trade. Therefore, if
you have a $10,000 account, you risk $200 per
trade. The key is not to lower the risk during
a drawdown. This would result in a much
longer process of digging out from under the
losses. So, you risk the 2% of your account at
the beginning of the month and only adjusting
the number up when you set a new ‘high
water mark’ for the ending account balance.
As an example, if the account goes down to
$9,000 then you would keep the risk the same.
If however, you end the month with $11,000
in the account then you made a $1,000 profit.
You would then set your 2% risk based on the new high water mark.
Correlation
Sometimes it happens that there is a very similar level at two (or more) heavily correlated forex
pairs or other trading instruments. If you see that price is approaching both of the similar levels
and that it will most likely hit both of them at the same time, it is better to lower volume in the
positions you are going to enter in order to lower your risk exposure.
If you don’t lower the volume of your positions, you are be betting too much on highly correlated
trades. These trades will probably end up the same way (all in profit or all in a loss). This way you
enhance your risk exposure, which is pretty dangerous.
Below, you can see an example of two visually very similar trading levels. One is on AUD/USD, the
other on EUR/USD. There is pretty strong selling activity and it is evident, that it is USD driven
(USD is strengthening and that's why both pairs go downwards). Both long levels get hit almost
at the same time. The USD is getting more and more strength, both long levels don't get respected
at all and they both end up as a losing trades.
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