What portion of your equity should you risk for your trading positions? In the today's article, I will reveal the types of risks related to your position sizing.
Quick note: your risk per trade will be defined by the distance from your entry point to stop loss in pips and the lot size.
🟢Risking 1-2% of your trading account per trade will be considered a low risk. With such a risk, one can expect low returns but a high level of safety of the total equity.
Such a risk is optimal for conservative and newbie traders. With limited account drawdowns, one will remain psychologically stable during the negative trading periods.
🟡2-5% risk per trade is a medium risk. With such a risk, one can expect medium returns but a moderate level of safety of the total equity.
Such a risk is suitable for experienced traders who are able to take losses and psychologically resilient to big drawdowns and losing streaks.
🔴5%+ risk per trade is a high risk.
With such a risk, one can expect high returns but a low level of safety of the total equity.
Such a risk is appropriate for rare, "5-star" trading opportunities where all stars align and one is extremely confident in the positive outcome.
That winner alone can bring substantial profits, while just 2 losing trades in a row will burn 10% of the entire capital.
🛑15%+ risk per trade is considered to be a stupid risk.
With such a risk, one can blow the entire trading account with 4-5 trades losing streak.
Taking into consideration the fact that 100% trading setups does not exist, such a risk is too high to be taken.
The problem is that most of the traders does not measure the % risk per trade and use the fixed lot. Never make such a mistake and plan your risks according to the scale that I shared with you.
this is a good article to mention risk management.,👍💕 well done
Xt-force
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Thank you for this article.
Wobbly46
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Nice article again, Vasily. Thank you! I particularly like the very blunt 'stupid risk' category. That made me laugh! Personally, I have found that after 19 months of learning to trade in demo mode, 2% risk offers me a very good all round balance, especially when I continue working hard to enter fewer and fewer trades 👍
VasilyTrader
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@Wobbly46, heeey, thank you so much! I appreciate your comment!
ProSignalsFx
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Good luck!
TopTradingSignals
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Yes, thank you!
Above_the_moving_average
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100% Risk should not be taken, ok - I was investing in Copytrader in Germany who had a 200% Performance in 3 month, with reasonable drawdown, in his profile, he tells about a decade of experience. From 313 Euros "shareprice" I invested it went up to 870 in the high after 5 weeks and then he blew all the 100k invested by a lot of people in a single trade to come down to 35 Euros. I am not angry with him, no risk no fun, but I found it kind of strange, hopefully nothing serious happened that he could not finish the trade....But that was a **** stupid risk (fill in the appropriate word) 😙
@VasilyTrader, just a thought, after gaining 100% take 50% of the capital out and go on 100% risk with the 50% win, that would be at least reasonable - but that was stupid, what he did.