If you’re day trading, you’re risking 1% of your equity every trade. You aren’t using 1%, you’re risking 1%.
That means, if you hit your stop loss, you’ve lost 1% of your balance. However, your position size changes based on how many pips away your stop loss is. If your stop loss is too close (say 5 pips), you’re position size will be a lot higher than if it is further away (say 15 pips).
Therefore, it’s possible to risk 1% and use more than 100 times your equity if your stop loss is too close. That is a statistical disaster waiting to happen and the fees alone will put you at a big in a loss right off the bat.
That’s part of why when you risk 1% of your equity, it’s important to also watch and limit your position size. Many say 3-5x is the best.
Example, if you trade $4000 then your stop loss shouldn’t make you lose more than $40 and your position size shouldn’t be worth more than $20,000, at least according to those rules because $20,000 is 5 times your equity of $4000
As for how much money you make if you traded every trading day and earned 1% the equation is below:
Increase your lot size. Basically what I have in my Hotforex platform is 60 lots on majors. Just imagine that with decently high leverage you can open 60 million dollar position. Profits are huge, but the risks too.
The moral: don’t make plans on tremendous profits, focus on small targets like 60-100% in a year, it’s great aim for newbie trader.
I am speaking of Forex, I set a max of 1% risk per trade which I can place more than one position but still the factions add up to one percent. If its a very strong trending market I will add to that position up to 2 percent of my equity.
That said I may take several trades even with different pairs and limit my overall exposure of my equity to 4% but not greater than 5% of my equity.
I allow enough room so that I can add trades when I find a runner by starting with only a 1/2% trade.
In order to size properly and scale in a trader must know their max and average number of wins and losses as well as how much that is in currency. For example if you know that your average rate of consecutive winners is 10 and your average rate of consecutive losers is 2 then when you get to ten wins you do not want to be scaling in conversely when you ge to two losers you may want o on the next winner.
Sizing is the meat the separates the rookie like me from experienced professional traders that make several percent daily and consistently.
Then I see. I’ve just misunderstood the whole concept I think.
I thought people were talking about position size when they were talking about riscing one percent on every trade
That is why I did not understand how people could make any money, even on a daily basis. So it is not the position size that is one percent of the account. It is the stop loss limit that is one percent of the specific trade. No wonder I could not wrap my head around this. Haha
What do you and other traders in here have as a typical position size on a position in general? Do you bet your whole account balance at times on a single trade? As long as you keep the stop loss at 1%, that would be okay according to the rules you have set up for yourself?
Or do you bet more like 10-30% or something in that region?
The answers that you are looking for may not matter much. You have to find what works well for you and your strategy. Any responses that you get may not be very helpful, depending on your trading style, where you are at with your trading, the rules and the goals that you have set for yourself etc…
You also have to consider that the responses that you may get, may come from traders that have not been trading for very long, that are consistently blowing up their account and/or that have varying risk-tolerance levels that do not correlate with your own.
A trader that is just starting out (or starting over), may decide to open 1 position at a time, using their entire account balance with each trade, until they reach a certain point, in an effort to expedite things – especially if they are starting out with a very small balance.
You also have to consider that not everyone will be maintaining a large balance, as some traders may limit their account size to a certain amount by regularly pulling out profits…so, for them, trading their entire balance on a single trade may not be an issue. Some traders may trade for additional income while others are earning their living from it.
Experienced traders will likely advocate low-risk trading and proper money management – which, you should definitely learn and eventually adapt. However, if you are just starting out, and your account balance is small, playing it super safe could take you a long time to make any real progress.
Ultimately, the larger your balance becomes, the less risk that you need to take with each trade, so it is all relative anyway.
Hi @MartiNnN, I have a simple question. If you are planning on starting with 10 000 USD live trading then why you are practicing with 100 000 on demo? If you don’t have any experience with Forex, perhaps it would be better to practice on demo with the starting balance you plan to deposit on live. I think that this would be a good precaution measure because 10 000 is quite a sum.
With respect, you still don’t have it right. When traders say “risk 1% per trade”, they’re NOT saying “set your stop loss to 1% of your usable account balance”.
They all work in tandem. You don’t necessarily have to manually choose a leverage amount to be trading with leverage. And I think once you read this, you’ll have a better understanding of how you can still make money only risking single digits and also reduce your risk while trading.
You are correct in saying it is hard to make a substantial amount of money intraday unless you have a large balance and risking a lot of capital. Unless the market is really volatile on a particular day and there are huge pip movements then the only other option is to increase your trade sizes. In general with a 50:1 leverage starting with $10,000 is a good start, I would say it would be the minimum to start with, but of course if you don’t have that sort of capital you’ll just have to make smaller sized trades and deal with what capital you have.
There is a section on this website which shows the average pip movement for currency pairs during a particular forex session (New York, London, Tokyo). You can use this as a starting point to figure out what you can expect to make (or lose) in each trading session based on your trade sizes.
