The first question that you should ask yourself before starting trading is: "How not to lose the money you already have?"
Risk management will help you with this.
There are many different "chips" and rules in order not to drain the deposit (and we will definitely talk about them in more detail). But today I want to discuss the most important rule: setting a risk limit.
Different traders will give you different numbers. Someone considers the optimal risk of 5% of the deposit amount, someone - 7%. But everyone agrees that the amount should not exceed 10%.
If a person tells you that you can bet more than this amount, he is not your friend.
I believe that 1% of the deposit is optimal for beginners to trade.
Few? No, it’s enough to make money and not enough to sell the house in case of failure.
Above is a table with comparative risks - how much and how quickly you can lose depending on the percentage.
I'll take $ 10,000 as an example. In this case, 1 percent of this amount will be $ 100.
$ 100 is 0.1 lot to open a deal. This means that 1 pip on the chart will cost us $ 0.1.
Maximum drawdown is the number of points that the price must go through in order for us to lose money (or, conversely, to earn).
For example, the EURUSD currency pair can pass 1000 points per day.
As you can see in the table: trading with an acceptable rate of 1% in case of failure will deprive us of only $ 100
10% - already $ 1000.
100% - all $ 10,000.
Yes, if we succeed, we will be in the big plus. But the risk also increases.
If you are a beginner trader, don't risk your capital. Open deals starting from a 1% deposit.
If you are experienced... You can assume that I am conservative, but I also advise not to use more than 1% of the deposit. However, you are free to choose the percentage that is safe for you based on your background and strategy.
Share with us what risk limit do you use in trading? Why choose this one?
What other risk management rules do you want me to talk about?