Risks and Losses of a Forex Trading System

RISK

Indeed, don't risk over 5 percent of your account balance on any one trade. This means that your extreme Stop Loss on any other trade shall not surpass 5% of your over-all account balance. Like for example, if you had $1000 account, 5% of $1000 is $50. This means that your maximum stop loss shall not exceed 50 pips taking you're trading one mini contract with a value of $1 per pip. I see new Forex traders every day risking 20, 30, even 40 percent of their account on one trade. With that risk, and four losing trades in a row, you'll wipe out your account. You can't last long taking wild risks like that, and the psychological damage will be lifelong. So minimize risk. Use 5 per cent as a maximum risk threshold. Personally, I risk not greater than 1-3 per cent on any trade. If you have larger account, you must follow the same rule, no exceptions. Even if how expert a trader you are, it's not unheard of to have 6-8 losers in a row. No person loves it, still if you stick with a 1-3percent risk limit, take furthermore be psychologically act for it, it will roll off your back instead of breaking your spirit.

LOSSES

Many traders long for Van Helsing’s cross to raise when this hellish beast shows it soul-stealing teeth: Losing trades! A new trader will often feel ashamed after obtaining a losing trade. He feels that he has made a fault and beats himself up over it. Penance does bad in this life, so confess your trading mistake, resolve to never commit sin, but do not torment yourself. Listen to the Truth: Losing trades are part of the game and are to be fully expected. Forgive yourself, and move on, but do not give up. It is the trading journey that overall will be correct, not each individual step. So accept each misstep. Like a shopkeeper paying rent to keep his store open, losses are part of the cost of doing business as a trader.


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I'm 44 year old full-time trader. It all started 23 years ago when I took a strong interest in trading as a US Marine. I currently manage a hedge fund for Green Rock capital and run http://fxcoaching.com/ where I teach and trade my systems.