Risk and Your Forex Trading Style
The most valuable part of any style of investing, is understanding your personal risk tolerance. Without a good understanding of this, the chances of you loosing everything are very high. Every Forex trading strategy carries its own risk parameters and these tie in directly with your risk tolerance. Then there is your style of trading, conservative, moderate, and aggressive.
Initially you may decide to trade a day chart. The bar movement over a day can be many of pips, so when you determine your stop position you have to assess what your drawdown risks are. If your money management is set at a 3% funds exposure, you will get into problems on day charts unless your account is substantial.
The 5M or 30M charts maybe more appropriate since the pip movement 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 vast draw-downs is going to clean out your account and trading career in no time at all.
A common risk level is 3% or $300 on a $10,000 account. Change 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 positioning, whether count-back or support and resistance or any other, indicates a 100 pip stop position, then you are not risking 3% but 30%! Three wrong trades and your account has gone!
An aggressive trader is prepared to take riskier trades that a conservative trader. They may be prepared to 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 highly controlled trader with good money management and risk rates, or a trader that will take exaggerated risks for big gains? If you are the latter, you will not be trading for long, that’s a guarantee.
If any of this leaves you a bit confused, you need to gain some knowledge, so commence 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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Tags: Forex Risk, forex trading, Forex Trading Style, Forex training, Money Management, Risk and Forex Trading, Top Dog Trading
