ACCOUNT RISK MANAGEMENT
Above is an important illustration that will outline the difference between risking 2% of your capital per trade compared to risking 6%.
If you happened to go through a 10 trade losing streak, you would have gone from starting with £20,000 to having only £11,459 left if you risked 6% on each trade.
After 10 losing trades you would have lost over 40% of your account.
If you were more conservative and risked only 2% of your account per trade, you would still had £16,674 which is only a 17% loss of your total capital.
- 10 trades at 6% per trade would mean a 75% increase is required to get back to breakeven.
- 10 trades at 2% per trade would mean a 20% increase is required to get back to breakeven.
The point of this illustration is that you want to setup your risk management rules so that when you do have a drawdown period, you will still have enough capital to stay in the game.
Trade Safe.
Above is an important illustration that will outline the difference between risking 2% of your capital per trade compared to risking 6%.
If you happened to go through a 10 trade losing streak, you would have gone from starting with £20,000 to having only £11,459 left if you risked 6% on each trade.
After 10 losing trades you would have lost over 40% of your account.
If you were more conservative and risked only 2% of your account per trade, you would still had £16,674 which is only a 17% loss of your total capital.
- 10 trades at 6% per trade would mean a 75% increase is required to get back to breakeven.
- 10 trades at 2% per trade would mean a 20% increase is required to get back to breakeven.
The point of this illustration is that you want to setup your risk management rules so that when you do have a drawdown period, you will still have enough capital to stay in the game.
Trade Safe.
Comment:
I personally trade 1% per position, however this is a great illustration of basic risk management that should be implement prior to any live account trading.