July 11th, 2010
Posted in Article from Forex Bliss Formula
Always bear in mind that some unforeseen event such as a natural disaster, war or unexpected death of a political leader could throw the entire market into misunderstanding. If you’re risking too much on each trade then at some point or another your funds will be wiped out. All systems have their swings and roundabouts and if your risk is too high, your account balance may not be able to recover from the downs. And if your stop loss is too near to your entry point, it’ll be triggered too soon.
So risk must be optimised for your system. It is dependent on drawdown and average profit or loss per trade, but a good rough guide is to risk between one percent and five percent of your funds on each trade. Only take the higher figure if losing your entire balance would not be a disaster. Generally, the more cash a trader has in their account, the more careful they are with it.
Some traders consider that having a set risk per trade is too inflexible and the danger should rely on the power of a signal. That may be a recipe for disaster in global currency trading.
Tags: currency trading, day trading, forex strategy, forex tips, forex trading, learn forex, trading system