Risk of Forex Trading
It can be difficult to tell what you should risk while trading your account. Some sources say no more than 2% or your account, others say no more than 3 or 4 % of your account. The actually percentage doesnt matter as much as the mindset behind the percentage. You need to be conservative as a trader; never risking more than 5% of your account, from there the actual number could be lower but not higher. If you think 5% isnt very much then you are right but you should also step back and evaluate your motives for trading.
Forex traders who are trading to earn money will be very conservative in how much of their account they are willing to put on the line because they realize their account is what is going to keep them trading from day to day. If a trader is looking to get rich quick then they will often put large percentages of their account at risk because they dont view money as an asset. Greed has been, is and will be the fall of many good traders.
Starting out small and then adding to the trade is a good idea because it gives you a chance to see where the trade is headed before you put large amounts of money on it. A good way to look at it is to start by trading 1-2% and then adding on from there. This will help you see that you are caring for your money in the best way possible. Practice knowing when to add real money to the trade in your demo account and don’t trade real money until you are very comfortable about judging the trend of the trade.
A lot of traders think they will be able to get the market to give them a certain money. However it is important to understand that the market may not willing to give the amount you are looking for. Go into trading with the mindset of getting what the market is willing to give. This mindset will protect you against making decisions because you need more money, instead it will give you the edge because you are studying what is really in the market.
You need to keep your emotions in check. If you have a loss you need to know how to handle it so it doesn’t affect the rest of your trades. If you win you need to know how to handle it so it doesn’t affect the rest of your trades. Set an amount you can afford to lose, an amount that you can lose without having it shake your world. Once you feel good about the amount and that you can stay within the bounds you have set then move to live trading
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