Having difficulty in determining the amount of loss i can afford

It is no need to be confuse to determine amount of loss which trader could afford to take because every person has different point of view about this but generally, traders shouldn’t depend on one transaction only. So, you should risk at most 10% of equity in single transaction. It means don’t risk more than 10% of your balance in single transaction if you want to trade with realistic risk. Your performance in trading is not depending on good decision or bad decision in one condition only but your capability to make analysis in many different conditions.

I will advise to use just 1% in trading. If you loose this money you will not suffer a lot. Low risk taking save you from big loss , In start do this practice for trading you will get low profits with it but having not much fear of loss.

It’s good to risk only 1% of your equity in each transaction but there is disadvantage too. If you risked only 1% of your equity so the target profit usually won’t be too high in every transaction too. It means you must capable to realize consistent profit (daily profit or weekly profit) in order to reach your target to reach as traders. It’s safer for your account in trading but the profit won’t be too high so it can make you boring to trade when the amount of capital is too low because the amount of profit is too low either.

The money affordable to lose can be determined by you since its your money and certainly your risk appetite applies here. And there could certainly be no account blocked if you are trading in a well regulated broker and you may incur margin call or even stop out based on the percentage of money you lose. For me if i had to invest $5000 in one single trade i would certainly not like to lose more than $1000. My risk appetite is quite higher.

Certainly losing small portion of money which avail more number of chances for the traders to excel in their trading career by sharpening their trading skills. But the amount invested should be decent enough such that even with 1% profit the traders can pay off their bills.

It’s no need to be confuse about amount of loss which you can afford although it can be different among traders. The general rule is trading which doesn’t make you too much worry with your open position with current lot size and current target. Example : if you risked 10% in single transaction will make you worry so it’s not amount of loss which you can afford to take. You need to lower down the risk, so you can trade with more relax and more confident with your analysis. Usually, traders should risk about 5% of equity to feel safe in trading but it is not fixed rule, you can adjust it with your own psychology.

You should only risk your ‘play money’, money that wont negatively effect you on any other areas of life if it was lost.

If that 5000 is put aside for Forex, then really trade risk comes down to what you’re comfortable with. You can risk $1000 per as long as you understand what will happen if you lose it. Always prepare yourself for the worst outcome.

Some people get emotional when too much money is on the table, can’t sleep at night and do silly things to the open position.

The question is what is your risk tolerance, financial situation and what you’re looking to achieve?

I am agree with you. It’s important for traders to lose money which they could afford to take because if you risked which you’ve prepared then you can be more relax in trading so you can be more focus on making analysis and the result will be better if you can be focus on analyzing the market.

It is right that traders need to be ready with the worst which can happen in each transaction so if it happens, then you won’t feel too depression when you experienced it. And also the loss can be minimized with good preparation in money management and risk management.

Every penny in your account should be money you can afford to lose.
If any of it isn’t, you should withdraw it before you start trading

I think that as a Forex trader we should think about how we are going to earn money and not how to loose it and this is why we have to keep our trading risks under control :slight_smile:

It’s no need to be confuse with amount of loss which you can afford to take in every transaction because it’s back to your own psychology and your own mind. Don’t look on other’s mind as your measurement about it. For guidance, normally traders would risk 1-5% of equity in single transaction (it can be lower than it for scalpers) so they won’t face Margin Call in short time. But every person has his own view about risk to take in trading.

Risk management is one of the most critical aspects in the forex trading business because of which the traders can either break their career or may their career or fortune.

Don’t hope in luck when you’re trading in forex because no one who can become expert traders with relying on luck only. If you want to be able trade well so you must prepare good strategy, good money management and good risk management. No one can win in every transaction but if you had good money management so you can gain more profits than losses with maximizing amount of profits to take and minimizing amount of loss to risk.

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We need to train this kind of management time by time because there will be much cases that we will face along with our trading activities…

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I think you are taking the wrong approach. Don’t go into live trading yet. Keep on demo until you can answer that question yourself.

To be more clear: a s/l should be a function of your expectancy, if you know, for example, that your system can produce 50% winners. has a 2:1 risk reward and normally has strings of loses of 3 - 5 then you could easily determine how much you can “afford” to lose in each trade not to put your account at risk.

But from the nature of your question I can asume you are still far from really knowing and understanding the possibilites of your system. I’d say there’s no need to risk real capital, even if you can afford to lose it all, for now.

This happens because our mind is not pressurized to achieve the goal set by us. Thus, we tend to explore the true potential we possess and this helps in achieving the success which we desire.

Technically, you can not lose more than your initial deposit, as the broker will keep a certain amount as margin, and close automatically all open positions as soon as you reach this amount, typically 25 percent of your total margin. Beyond that, you need to decide how much you are willing to risk. It depends on the money management system you use, based on your strategy expectancy. Always risk only 1 percent of your account will not be the best choice probably. Even though you will control losses, you will not optimize your rewards. Once you know your strategy expectancy you can use a mathematical money management model that will optimize your overall performance. Another aspect is psychological, and the maximum loss you will be able to tolerate at a given moment.

It is a simple fact that if the trading margins that we are using are more then we will be able to do our trading easily and with lower amounts of losses in the long run…