Risk and Your Forex Trading Style
Posted by kchickeymonkeyThe most valuable part of any style of investing, is being aware of what level of risk you are comfortable with. Without a good comprehension of this, it will be way too easy for you to loose all your capital. Every Forex trading strategy carries its own risk parameters and these tie in directly with your risk tolerance. Then there is your trading approach, conservative, moderate, and aggressive.
Initially you may decide to trade a day chart. The bar movement over a day can be hundreds of pips, so when you protect your position you have to assess what your drawdown limits are. If your money management is set at a 3% funds exposure, you will get into problems on day charts unless your account is large.
The 5M or 30M charts maybe more suitable since the pip range tends to be less, so your stop strategies can fall within your management margins.
Yes, we all want increase our wealth from out trades, but risking ones account to large stop positions and large draw-downs is going to clean out your account and trading career in the blink of an eye.
A practical risk level is 3% or $300 on a $10,000 account. Convert this to pips, 1 standard lot ($100,000) has a pip value of $10 so if you trade end of day and your stop loss placement, whether count-back or support and resistance or any other, determines a 100 pip stop position, then you are not risking 3% but 30%! Three reversed trades and your account has gone!
An aggressive trader is open to taking riskier trades that a conservative trader. They will expose bigger sums or money in riskier trades with the hope of achieving larger returns – often over longer trading time frames but they may still use the similar strategies for shorter times as well. Very much the ’all risk’ trader.
So where do you think you sit? Are you a level headed trader with appropriate money management and risk rates, or a trader that will take over the top risks with all or nothing gains? If you are the latter, you won’t be around for long, that’s a guarantee.
If any of this leaves you a bit bewildered, you need to gain some knowledge, so begin by getting your Forex training with Top Dog Trading, you will learn a huge amount and it will help you trade with safety to win pips not risk everything.
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Where there’s smoke there’s fire, I always say. You couldn’t have put it more succinctly, and I’ve seen a lot of posts on this topic. I can’t say I agree with all of it, but it sure hits the mark better than most.
Too true, my man.. you nailed it but I still think theres three or four ways to skin a cat! Tried trend trading like th turtles did? It’s not too hard and still works like back in the day.
Trading without a automatic bot system is really hard and I dont know how anyone can expect to make money doing it like that. I have been using eas and bots for years and it works for me most of the time.
I’ve been trying to learn about these things for a long time and I really want to get my trading up to a higher level. Other than babypips.com where can I go to really learn what’s what in forex?