Whats your Risk percentage per trade?
Forex Risk Management – Whats your Risk % per trade?
Forex Risk Management
Whats your risk % per trade?
Or should i say, what’s your risk appetite?
To be a successful forex trader. You will need to have a proper money management system.
It starts with identifying what level of risk % per trade will you risk.
As a guide, a safe and good risk percentage will be from 1% – 3%.
Anything higher than 3% will be relatively risky.
Why is this so.
If you understand, the forex market can do anything.
Even if you are sure this is the MOST perfect setup.
It MAY NOT end up the way you expected it to be.
Why?
Forex Risk Management – Whats your Risk % per trade?
Forex Risk Management
First, you must understand that anything can happen in the forex market.
Just for example, even if it is the most perfect setup. If a major institution pumps in a large sum of money at that period oftime. It can change the direction of the market for a short time frame.
And when the retail investors see the market moving in the direction stipulated by the major institution, they will then follow suit and enter the same way.
WHICH causes the movements in the market.
But of course, this doesn’t happen always.
What i’m saying is, anything can happen in the forex market.
So even if you are the best forex trader in the world. You will not have a 100% winning rate as well.
You will still lose as the market can do anything.
Which is why, it is not wise to have a high risk per trade.
Forex Risk Management – For example, if a trader risk 10% per trade.
And a series of unfortunate events happen to him, (maybe it’s a distraction, maybe there’s an earthquake etc)
As a result, he made a series of 5 losing trades.
He would have wipe of 50% +- of his trading capital because he risked 10% per trade.
And with just 50% left, it will be hard for him to make back his loss.
So if you see what i meant.
Forex Risk Management – For example, if you risk 2% per trade.
With a series of 5 losing trades. You would only lose 10%+- of your capital.
Which is not to bad.
With a good trading system, we can easily make back the money loss.
Forex Risk Management – Whats your Risk % per trade?
But here comes the big question.
What is your risk appetite?
You see, there is absolutely no point into asking you to risk 1% per trade.
Forex Risk Management – Eg. Capital $5000
Risk of 1% = $50 per trade.
If at the back of your mind, you do feel that $50 per trade is too little.
Then you will most likely find and trade even more trades that you usually should – in order to make more money. Right?
Therefore, the correct way to set your risk % per trade varies with different individuals.
You must ask yourself.
Forex Risk Management – Eg. Will you be satisfied with
$50 per trade or
$100 per trade or
$150 per trade
based on the capital of $5000
Once you got an answer, you got your risk percentage.
Forex Risk Management – Whats your Risk % per trade?
Forex Risk Management
Remember,
1) Your risk percentage cannot be too high. As mention a good gauge is 1% – 3%.
2) Your risk percentage must meet your risk appetite. There is no point in risking 1% if you find the amount too little and does not satisfy your hunger.
So there you go.
Once you have set and decided on your risk % per trade.
STICK FIRMLY TO IT!
For example, in a series of trades. You cannot have eg. 1% on 5 trades, then 3% on 5 trades etc.
Because if you play it this way, and what if you make money on the 5 trades with 1% risked, and lose money on the 5 trades with 3% risked. (which usually happens!)
YOU WILL LOSE MONEY!
Therefore, stick firmly to the risk percentage per trade which you have set.
Eg. If you set 2% risk per trade.
From now on, every trade you take – You will risk 2% per trade.
NOTHING MORE, NOTHING LESS.
This way, you will be consistent and you are on the right track to success.
This is part 1 of the 2 series of Forex Risk Management.
Stay tuned for the 2nd part.
Check out our online forex trading AFM winning Forex Price Action Forex Course where i teach you the exact FULL Forex Trading Strategies | system that i personally use to be consistently profitable.
See you on the other side my friend,
Asia Forex Mentor
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Its a very common and important forex trading topic. Managing risk per trade is necessary. Buit traders with low capital investment do not care much about it.
Stick to your rules
Once you have set and decided on your risk % per trade.
STICK FIRMLY TO IT!
For example, in a series of trades. You cannot have eg. 1% on 5 trades, then 3% on 5 trades etc.
I dont think it is necessary to set a fixed percentage. We can also define a range. Actually we can do trading depending on the level of probability of success. Higher level means we can risk a little high percentage and lower level or probability means less risk.
I dont think it is necessary to set a fixed percentage. We can also define a range. Actually we can do trading depending on the level of probability of success. Higher level means we can risk a little high percentage and lower level or probability means less risk.
Most of the times a fixed percentage is better. Coz even higher probability of success cannot assure that u will win more than u loose. Sticking to a fixed percentage rule allows us to create patience and discipline. Sometimes we r very sure that market will go our way but it doesnt. So risking higher percentage means risk of higher losses.
In the end it is trading experience which decides what to do.
Originally posted by illiterate
I dont think it is necessary to set a fixed percentage. We can also define a range. Actually we can do trading depending on the level of probability of success. Higher level means we can risk a little high percentage and lower level or probability means less risk.
Most of the times a fixed percentage is better. Coz even higher probability of success cannot assure that u will win more than u loose. Sticking to a fixed percentage rule allows us to create patience and discipline. Sometimes we r very sure that market will go our way but it doesnt. So risking higher percentage means risk of higher losses.
In the end it is trading experience which decides what to do.
I agree with ur point. We should define a maximum risk percentage per trade. It is an essential part of risk and money management.
The good or ill of a man lies within his own will. – Epictetus
Should be 1%, but I usually have a 10%
Originally posted by davidalfonsiShould be 1%, but I usually have a 10%
Actually it depends on your investment and leverage u use. 10% means u r investing small amount. Usually investors with big capital risk less percentage and vice versa.
The good or ill of a man lies within his own will. – Epictetus
Since I am a newbie trader I try to reduce my risk and losses and aim at some consistent profits but still I feel risk % o f 5% - 10 % is suffficient and we should not exceed that initially .
Generally the risk exposure for each trade that is between 1% and 3% of your capital.
Per day, i'ld say about 10% is not too bad![[dead]](/themes/default/images/smiles/dead.png)
It should be 1-2%. Even with 2% per trade, with 1-2 trades per day, and 2:1 r/r, and a 50% win rate, thats 5-10% per week, over 20-40% a month, and huge amounts per year. Within a couple of years, you would be a millionaire starting with a small account.
I keep 4% my capital so that i can able to trade well and make a good amount of profit through it and i am just working hard here to make some large profit but for it we need a large capital.