How much should I risk per trade ?
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Don’t be greedy. Do not think the profit or pip value is too small you want to increase. If you want to increase your pip value, increase your margin or capital. Do not increase your risk.
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For me one of the best replies to a post. Stick to a max of 2% risk
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Think in terms of % of your account capital at risk and % of account capital profit. Remember that quite a low perfofmance strategy can be very lucrative if you have found a profitable strategy that you can apply consistently - 6% of profit per month will double your money in a year.
Hi Azeem
This is a very good question for a beginner because you have no historical evidence to compare it against. So strictly the first question is “How much are you prepared to lose for a venture in which you have no experience?” For me, third time around in Forex, the answer to that question is “Nothing - my first objective is to learn how NOT to lose money”. That is why members encourage us newbies to start with a demo account, so we do not lose our money when we start trading Forex.
When you start with a trading idea (which you should have many of after reading School of Pipsology), why go for the 2% as a maximum. There should be no hurry to lose money. Whilst I am still in my “learning stage” third time around and am currently still educating myself and formulating an “algorithm” to back test, I am doing a very limited trial taking entry advice from a colleague. I have entered (demo account) with 70 trades to date over the past four weeks, and each trade is 1/2 % of my bank (equity). I am pleased to advise that this demo bank is up by about 12% over the first 70 trades, and that may make you think that I have found a gold mine. However, from what I read, I will need to place over 1,300 trades for this particular strategy to be reasonably satisfied that this is an edge, not just beginner’s luck. That is because the odds of success are theoretically just under one in ten, but the R value is around 12. Bottom line, make sure you have a trading strategy, a trading plan, the plan has been back tested with the same underlying that you intend to trade, and that it is all confirmed as having a positive edge in a demo account.
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Hello,
i think we should also mention, that this so called very famous “max.2%” rule is ok especially for beginners or in general, but even here on babypips some teachers argued that sooner or later, when someone comes in the profit-zone with his trades, this rule is not an eternal rule hammered in stone. (it is mentioned somewhere here, i dont know now where i read it).
The teachers also say, that in the end its up to someones trading performance or risk tolerance how much he can risk on one trade.
So “2%” is the save way, but if you can afford it, and with more experience, you wont brake a “Golden Forex Rule” if you risk more than 2% in certain situations.
BUT NOT WHEN YOU START TRADING!!
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Totally up to you and what your trading plan tells you.
2% risk is OK but what will be when a trader lose 10 trades in a row and lost 20% of his money?
I am quite comfortable risking between 3-5% but…
I rarely lose 100% on any one trade and am quick to move stops.
Also I do not trade small timeframes.
2% is an adequate amount for a beginner trading daily charts - half that I guess if trading intra day
How many trades per day do you take?
Personally I never risk more than 0.5% of my account on any one trade.
For me this serves a couple of purposes;
- It is a small enough amount that I am never tempted to move my SL or TP and just let the trade play out.
- I often will take up to 10 trades per day - I never risk anymore than 5% on open trades at anyone time - so taking smaller trades allows me to spread that risk.
- It works for me and allows me to grow my account with minimal drawdown.
- It suits my strategy in terms of strike rate and R:R
If you are taking 1-2 trades a month with a higher strike rate strategy then obviously 0.5% wouldn’t be adequate… so it really depends in my opinion.
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Depending on the strategy, people adhere to a range of 1-5%. Well, you should understand that everything depends on the situation, experience, capital size, etc.
And in general, there is a demo for a start, to assess all the risks and learn to make decisions.
Risk a very small percentage of your account capital - so small that if you lose 20 times consecutively, you will still be able to trade.
Anywhere between 1% to 3%. If you’e new, risking anymore than that would not be sensible.
If you are taking your baby steps on forex market, 2% or even 1% would be fine for you. As you gain more experience, you will eventually find your right measure
In the initial phase of your career, it should be as little as possible.
Because at the beginning of your career in the market you have to take all precautions and in case something goes wrong, you can quickly solve your troubles.
I think that on the fundamental analysis it is possible to afford a little more, because it really can be profitable. But of course it’s all individual and it can all be subjective. It is necessary to make each decision individually.