# ACCOUNT RISK MANAGEMENT

FX_IDC:EURAFN   EURO / AFGHAN AFGHANI
1468 23
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.

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.
Could u explain why u use 1% per position?
Thanks!
McKuz
@McKuz, No problem at all.
Good Point, thanks
What do You think about keeping constant risk over multiple trades? Let's say You calculate 2% from Your entry level and stick to it via 6 trades.
When You calculate % risk each time You will not have positive outcome from 3 loses at begging and 3 winners on end, when Your risk/reward is 1:1
rafal_w
Hi,

This is true, however it depends on how your plan is set.
For example at target 1 would you take off half of your position and let the remaining run?

Again it would all depends on what kind of strategy you are using, is it harmonic patterns or structure support?
If you are trading harmonic patterns you usually get 1.5:1 if not more depending on how deep the patterns complete on the Fibonacci.
If you are trading support and resistance most trades give a better than a 1:1 risk reward ratio.
Many traders make the mistake of letting there losing trades run and cut there winning trades short, try not to be greedy but squeeze the pips out of the winning trades and cut the losing trades short.
Very valuable info Tom, many thanks for sharing.
HEmmanuel
Thank you.
Thanks Tom, always important to be aware of :-)
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