If you want to hold trading positions for a very long time, then you need to understand two things:
- Risk management
- Level close position.
Why are these two things important?
When I start a transaction and study, there are times when I’m so confident that online trading will generate profits because high self-esteem will obscure the meaning of risk on forex trading.
Now, without power the moment of loss will continue to rise beyond the comfort level and ultimately make a big loss! Stop loss is hit with big losses.
Now I am struggling to re-create a forex trading account because it just suffered a huge loss.
What is the risk per trade?
First determine how much you feel comfortable to risk losing on every trade you make. You need to specify, how many% (percentage) of risk per trade.
Let’s make some calculations, if you have a risk of only 2% of the accounts in each trade, then any 50 consecutive transaction losses will remove funds in the $ 10,000 trading account.
If you have funds in the account $ 5,000 then with a 2% risk per trade, this means equal to $ 100 risk per trade. With a 5% risk, you risk $ 250 per trade.
With a 10% risk then the risk per trade is $ 500.
Personally I trade with risk from anywhere between 1% to 5%. By prescribing 5% per transaction for me it is suicide.
Here’s what I do:
- I have a daily trading risk of between 1% and 5%.
- If I lose 5% on this day, then I will stop trading.
- When I trade on tomorrow, I will trade with 1% or 2% trading risk every day.
- I will trade with little risk until my original account returns.
So, it is important for us to know both of the above so that we can use it on forex transactions daily.