How to preserve your Trading capital till you become a Forex Professional

Trading Discussion Risk Management Practices
1

Staying long enough in the market while learning to become a better trader boils down to one thing, Money management. How well you manage your risk on every trade, goes a long way in your survival in the Forex market, today I’m sharing a piece of advise from my favorite trading author Dr. Alexander Elder.

The 2% and 6% Rule

The 2% rule states that you may never risk more than 2% of your account equity on any single trade, no matter how good the trade looks.

The 6% rule limits the risk in your account as a whole by stating you may never expose over 6% of your account equity to the risk of loss in a month. For example, if you trade a $1,000 account and risk $10 on every trade, you may not have more than 6 open trades at any given time except you have shifted your stop in a position to break even or profit level, then you can open another position. Suppose you lose money on two trades—now you are not permitted to have more than four open trades. You’ve already lost 2% and have only 4% open risk available for the rest of the month. This rule allows you to have more trades when You’re on a roll, but slows you down when you are starting to lose money and preserve your capital for long enough to learn.

As a reminder You could also check out babypips Risk Management course. Undergraduate - Senior - School of Pipsology - BabyPips.com

1 Like
2

This is the aspect that kills most accounts. So easy to get greedy and overtrade, ignoring this rule and then before you know it, poof! Account blown.

1 Like
3

Yeah, you’re correct.

1 Like
4

Don’t trade with real money until you are profitable on demo. Demo accounts are the best free offer since forever.

2 Likes
5

We tend to be more profitable on the demo accounts but not that much on the real ones.

6

You need to work on your trading psychology.

7

I think it’s a good idea to forget about the 2% rule and keep the lot size to a minimum. Trade 0.01 lots.

I think it’s good to do this because you can focus on the profit %, but you still get a sense of real trading because you’re dealing with real money, even though the risk is small.

And if your account is shrinking while trading 0.01 lots, and your account’s been chopped in half…well, that should motivate you to take a close hard look at your mistakes.

1 Like
8

I lean towards being risk averse anyway and always looked to preserve my capital. Gambling mentality has never appealed to me fortunately.

1 Like
9

Risk is directly proportional to income, and good news is given every day, which supports the use of simulation tests

1 Like
10

Preserving your trading capital should be your first priority. It is more important than being profitable.

1 Like
11

Proper knowledge and trading psychology help you to make a profit. If trading psychology is not managed properly, success in trading is not possible.

12

True! Trading psychology is very important, it’s just as important as how well you manage your risk, without any and your account would be bleeding lol

13

As a beginner, I was always confused about making short-term investments or long-term investments. But soon I realized that both the investments have their own benefits and that’s why we should make both investments simultaneously.

1 Like
14

Money management and risk management need to be properly maintained to keep the capital safe.

1 Like
15

That’s surely a nice thing to try, I started with position trading, but not being patient enough and also having less capital for that I switched to swing trading which perfectly suit me :smiley: with time you would find your own trading niche.
Good Luck !

16

Make yourself prepared enough with proper knowledge and practice so that you can learn to manage the capital.

1 Like