Forex Risk Management
Frequently talked about and for good reason, Risk Management is a crucial consideration when trading but many inexperienced traders either ignore it or take it as a minor consideration. Big mistake...
I (and im hoping many others will) advise to spend a little more time understanding why risk management is seen as so important and the proper way to implement it - Leverage will not mean the end of your account but a bad strategy and improper risk management implementation can be a deadly cancer eroding at your trading portfolio.
Risk management as a simple x-% number is not even the tip of the iceberg, setting up a stop loss which will close your trade is considered the minimal risk management in my books.
I hope many of you will agree and whether you agree or disagree I would like you guys to post up what you consider is proper risk management any indicators and experience you consider is relevant to help out anyone maybe less experienced or need some help in this regard.
RM is definitely ignored by new traders most of the time or simpl not taken as seriously as they should (i was one of them, my 1st demo account went bankrupt from trying to re-coup my losses) and ignore their bottom lines.
Although im still feeling my way in the dark for Risk Management during a trade, i think the most important issue is a lack of education of how to manage risk and why there should be a bottom line. I' am yet to find any indicators and anything worth advising other of so far so I would be very interested in seeing this topic develop, but my two-cents worth is there is a lack of awareness for the need of a bottom line and how to manage the risks when things go pear shaped
Originally posted by 4nt5RM is definitely ignored by new traders most of the time or simpl not taken as seriously as they should (i was one of them, my 1st demo account went bankrupt from trying to re-coup my losses) and ignore their bottom lines.
Although im still feeling my way in the dark for Risk Management during a trade, i think the most important issue is a lack of education of how to manage risk and why there should be a bottom line. I' am yet to find any indicators and anything worth advising other of so far so I would be very interested in seeing this topic develop, but my two-cents worth is there is a lack of awareness for the need of a bottom line and how to manage the risks when things go pear shapedBased on your experienced why do people ignore risk management?
Originally posted by Gerski
Originally posted by 4nt5
RM is definitely ignored by new traders most of the time or simpl not taken as seriously as they should (i was one of them, my 1st demo account went bankrupt from trying to re-coup my losses) and ignore their bottom lines.
Although im still feeling my way in the dark for Risk Management during a trade, i think the most important issue is a lack of education of how to manage risk and why there should be a bottom line. I' am yet to find any indicators and anything worth advising other of so far so I would be very interested in seeing this topic develop, but my two-cents worth is there is a lack of awareness for the need of a bottom line and how to manage the risks when things go pear shapedBased on your experienced why do people ignore risk management?
As I mentioned I think the issue is a lack of awareness with new traders for risk management, if you have seminar mentor they will usually focus on the glossy side of trading to encourage new traders, if you dont have mentor like myself then there isn't even the notion of risk management to begin with. The only exception is for the lucky few who may have a 1 on 1 mentor who will walk a student trhough it with risk management, BUT again being taught a theory and exercising it in practice properly is another thing to do with experience.
If there are any slightly experienced/ veteran traders reading this i would love to hear a few pointers on risk management, Cheers!
Originally posted by 4nt5As I mentioned I think the issue is a lack of awareness with new traders for risk management, if you have seminar mentor they will usually focus on the glossy side of trading to encourage new traders, if you dont have mentor like myself then there isn't even the notion of risk management to begin with. The only exception is for the lucky few who may have a 1 on 1 mentor who will walk a student trhough it with risk management, BUT again being taught a theory and exercising it in practice properly is another thing to do with experience. If there are any slightly experienced/ veteran traders reading this i would love to hear a few pointers on risk management, Cheers!
I can relate to this, the short course i took (2 weekend days) on forex trading i particpated in wasn't that informative. With little time the mentor focused on the technicalities of trading and only mentioned risk management aspect, and being new to the whole forex concept 2 days was definitely not enough time to absorb the huge amounts of information.
Hey guys,
I came across this topic and thought of this video I found on Youtube, thought you might be interested in it (http://bit.ly/1bzQnfL) . I think the general rule of thumb to risk only about 2% of your total capital.
Its a sensible amount and limits risk or loss, providing plenty of opportunities for profit after. NEVER do an 'all or nothin' trade.
Hope this helps, and looking forward to other tips!
Originally posted by fxlotsHey guys, I came across this topic and thought of this video I found on Youtube, thought you might be interested in it (http://bit.ly/1bzQnfL) . I think the general rule of thumb to risk only about 2% of your total capital. Its a sensible amount and limits risk or loss, providing plenty of opportunities for profit after. NEVER do an 'all or nothin' trade. Hope this helps, and looking forward to other tips!
The % varies from person to person, but most do prefer between 2-5% per trade. But there is more to risk management than a %, over-trading/exposure to a single currency is accounted for as well.
By the way the vid was very useful. As much as i agree im going to give a counter argument here by saying ATR is best used during a volatile periods only whereas it would be less useful during periods of calm predictable trading (single general direction).
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I have been researching risk management and i noticed there is a lot of textbook info flying around and the obvious doesn't appear as obvious for most of us. What traders need to remembers is all risk management techniques wont be of much use unless the trader considers he pre-requisites of any trading market. This topic will be very interesting to see what traders new and experienced bring to the table in regards to obvious risk management techniques.
Well, traders don't tendto give too much away otherwise they will dilute their own techniques too much, hence trading can be a lonely career... having said that i think it comes down to personal judgement weighing profit and losses.
As a personal risk management technique I only buy/sell a small amount, so if i lose im not too fussed.. But if I win then its a bonus, i think thats where the general rule of thumb's 2% originates from... dontthink u will definitely profit, think whether you'd mind losing that money in a single trade.
Originally posted by cheesyfingerWell, traders don't tendto give too much away otherwise they will dilute their own techniques too much, hence trading can be a lonely career... having said that i think it comes down to personal judgement weighing profit and losses.
As a personal risk management technique I only buy/sell a small amount, so if i lose im not too fussed.. But if I win then its a bonus, i think thats where the general rule of thumb's 2% originates from... dontthink u will definitely profit, think whether you'd mind losing that money in a single trade.
Heya Just thought I'd comment on the 2% rule, I found this calculator which calculates for you the maximum risk you should take on a single trade... its a simple online calculator so cant confirm whether it works well or not yet but the link is http://bit.ly/152Ejj4
Ps for any rookie traders; risk in forex means the position size you are opening not the closed equity you have in reserve
Originally posted by cheesyfingerWell, traders don't tendto give too much away otherwise they will dilute their own techniques too much, hence trading can be a lonely career... having said that i think it comes down to personal judgement weighing profit and losses.
As a personal risk management technique I only buy/sell a small amount, so if i lose im not too fussed.. But if I win then its a bonus, i think thats where the general rule of thumb's 2% originates from... dontthink u will definitely profit, think whether you'd mind losing that money in a single trade.
Making smart use of Expert Advisors and the indicators is also a good risk management as it highlights trends and reduces your chance of making mistakes before you even know what you're really looking at.