How much risk do you have to take in each transaction?
What a great question!
Try to limit your risk to 2% per trade.
But this amount may even be a little high.
Especially if you are a novice Forex trader.
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The following is a good example of the difference between risking a small percentage of capital in each transaction and risking a high percentage.
Risk 2. vs. 10% per transaction
Note the table above. The result of 19 trades with a loss in risk is calculated at 2% per trade and 10%. You see, there is a big difference between risking 2% of an account compared to risking 10% of an account in a trade!
If you happen to be in a losing streak and only lose 19 consecutive trades, and assuming a 10% risk per trade, with an initial capital of $ 20,000, only $ 3,002 will eventually remain in your account. .
You lost more than 85% of your account!
If you risked only 2., you still had $ 13,903 left in your account, which is only 30% of your total account loss.
Of course, in the worst case, it is to lose 19 consecutive trades, but even if you lose only 5 consecutive trades, it is enough to pay attention to the difference between risk of 2% and 10%.
If you took a risk, you would still have $ 18,447.
If you risked 10. you only had $ 13,122. Even if you lost all 19 of your trades at a 2% risk, your balance would still be more than that.
The point of this statistic is that you need to adjust your risk management rules so that when you have a course, you still have enough capital to stay in the game.
Can you imagine losing 85% of your account? !!
You must earn 566% of the amount remaining in your account to be able to get back to the point!
Trust us, you should never be in such a situation.
” To return to breakeven What should I do? “
You find that the more you lose, the harder it is to get back to your original account size.
This is a strong reason to believe that you should do everything you can to protect your account balance.
Remember that when we say n percent of the risk per transaction is allowed, this is a percentage of your current capital, not a percentage of your principal. So if you had $ 20,000 and you lost and your capital was $ 15,000, in a new trade you have to calculate the risk based on your $ 15,000 balance.
So far, we hope you understand that you only need to risk a small percentage of your account in each transaction in order to survive the loss or loss and also to avoid a sharp drop in capital in your account.
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