I am new to Forex trading. I have done trading in demo account now planning on real account. I want to know if i invest $5000 with a leverage of 1:100, how much loss can i afford and whether at certain amount of loss my account can get blocked or not ?. i mean can i trade no matter how huge the loss become until i get profit. ? or does it have to do something with margin and free margin ?.. need help. thanks.
I would assume you can afford to lose it all,
I would take $100 and trade that for a week. If you do well, add $200 more to your account. If that week goes well, add $400 to your account and so on.
Dont throw the $5,000 into the fire right off the bat.
Afford is a funny word. You either can or cant. I probably didnt answer your question, but with saying that, I think you need to hit the books,… Was your time with demo productive? Are you winning?
It’s very simple, how much can you loose and it won’t other financial responsibilities you have to take care of? This amount varies for some people, some people can afford to loose a million dollars while to others, its just $1,000/ when I learnt about forex straight out of high school, I could only afford to loose $100 and that was the amount I used to open my first live account on Profiforex.
trade 1 percent your loss should be 5 dollars for every one trade.
If you are going to risk 1% of the $5,000 per trade that would be $50 per trade to start.
What you really need to know is your expectancy. This depends on your implementation. How do you get in and out of trades? Using a backtest, you should have an expected value for the number of trades you will do in a given period of time. Will you do 100 trades in a year? 500? 1000? And what percentage of those trades will lose? 40%? 50%? 60%? If you do 100 trades and lose 60 of them with a $50 loss each time, you need to win $75 on the winning 40 just to break even.
If you give some more details about your setups, there are some savvy peeps in this forum who can help you get an idea about your expectancy and how different position sizing algorithms and risk percentages will affect the long term outcome of your effort.
Without knowing those details, I will start you with my big lesson from last January with the SNB shock: keep most of your trading capital in a local bank, give your fx dealer just enough to do your trades. I currently have 60% of my capital in a local bank.
Another thing to consider: the percentage of your trading capital you risk each trade does not only effect your drawdown size, it can also make your total expectancy negative! An example is a coin flip game: heads you win 6:5 odds tails you lose whatever you risk. We look at that and think: “As long as I risk not enough to go bust with a string of tails, this game is an easy winner!” Wrong. If you risk the same percentage each flip and that percentage is greater than 19, you will lose more the more you flip. It is a counterintuitive mathematical reality.
So you really need to know about your system’s expectancy or have a method that will make adjustments to prevent the turning of a positive expectancy to negative.
May the forx be with you.
-Adrian
Risking 1 percent of avaiable capital pertrade is very good and really advisable but how about the reward? i mean high risk is high return the its equal principles with low risk is low return , then are we satisfying with the return that achievement at per trade , so its also depend with how grateful with the profit that was achieved then decide how afford the loss that will possible .
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 
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.