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Thread: High Risk Trading or Low Risk Trading?

  1. #1
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    High Risk Trading or Low Risk Trading?

    Most of trader's are struggling in forex trading market, and wrong and poor risk management is one of the big cause of it. Its very common that all trader's have to take risk to make money but most of them not able to calculate it properly that how much risk they have to take in each trade.

    Risk factor is very important element of our business. And its very important to learn that how much risk we should take in the market. There are many types of trader's in forex market they have their own characterstics, Many trader's want to make big massive money by taking high risk and some of them want to focus on consistent money making goal by following very less risk for their each trade.

    We can read everywhere all over the internet that there is risk in forex. Without taking risk we can't make money in forex, that's true but trader's should understand the value of low risk trading in forex. By taking a very high risk trader's are making this business more hard and dangerous for themselves. There are many trader's who are working more than 3 to 4 year's in forex but still they are not able to make consistent profit. A trader should have good idea that what should be the level of risk for his or her trading style.

    Now the main question is how much risk a trader should take in trading and How he can know much about it?

    First of all a trader should spend a lot of time in demo trading account, Some trader's say that spending a lot of time in demo trading is useless or waste of time for them. But I am not agree with them, a trader should have a good idea about his risk, We should test our trading strategy for couple of months and should check that which type of risk size working fine with our strategy like 2 percent risk per trade, 3 percent risk per trade, or 5 percent risk per trade. I would like to discuss couple of exmaples regarding it.

    Example:
    Trading account size: $2000

    Suppose you are following technical analysis (support and resistance) in your trading and you are using h4 time frame for your trading analysis, You opened an order in 4 hour time frame chart with 30 percent risk of your account means you are taking risk of $600 equity for one trade. Even you risk and reward is good like 1:1 or 1:2. But are you sure that this type of trading will give you any success for long term time?

    The answer is no, I don't think that by taking 30 percent risk of our account for each trade we will able to make consistent income, because we have only less than 4 chances to place our trades in the market. There will be no much money for 4th transaction in our trading account. We can loose all our three continue trade's very easily in the market, its very common and can happen to anybody.

    Example 2:
    Trading account size: $2000

    This is the second example, Suppose you are following the same analysis like Example one as I mentioned above, but in this analysis you are taking only 2 percent risk of your equity for each trade. It means you are taking only $40 risk for each trade, it means we have a lot of margin for your next trades, you have total fifty trades margin in your account. Yes, that's awesome, And by following this type of risk management you can surely get a good ouput from your trades.

    Bottom Line:
    Hope you all get a very good lesson about Risk management from this thread. Guy's nobody can make a big profit consistently by taking very high risk, so in my opinon we should take 1 to 2 percent risk of our capital for each trade. Stop gambling and be a good trader, Have a good time.

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  2. #111
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    Quote Originally Posted by Khimi234 View Post
    We can loose all our three continue trade's very easily in the market, its very common and can happen to anybody.
    yes the chance on working with the better supports on resistance with the account those helps as trader to work on exploring the wider on option with the ways on managing requests of order to deliver returns of profit as having of chance with the further on extent of manage as securing order with the decision as releasing policy on expending the use of margin and the resource on traders absence with the good preference.

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  3. #112
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    Quote Originally Posted by forexfighter007 View Post
    A trader who is strong in his mind will surely be strong in following his trading rules. That way he can have good trading results. I love to trade and am a discretionary trader. i like doing my own analysis and place trades myself. i guess the advantage of having an automated trading system is no emotions involved.
    [lang=id]have a strong commitment will make them do trading with follow the rules, of course, because this is the foundation for them,
    but some words about automatic trading or robot, there is no emotion in there, there is advantages and disadvantages, but this is not a solution for them who want to grow to be a real trader[/lang]

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  4. #113
    Trader techboy's Avatar
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    Quote Originally Posted by samprazaan View Post
    [lang=id]have a strong commitment will make them do trading with follow the rules, of course, because this is the foundation for them,
    but some words about automatic trading or robot, there is no emotion in there, there is advantages and disadvantages, but this is not a solution for them who want to grow to be a real trader[/lang]
    Commitment in trading is a must if we want to be a successful trader, whether we use manual trading system or via EA it requires commitment, being a successful traders requires time, years of constant practice and learning is a must before an aspiring trader becomes profitable.

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    " Trading is 70% Psychology, 15% Risk Management and 15% Strategy ! "

  5. #114
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    Different traders could have different consideration and different mind to choose high risk trading or low risk trading. But for long-term of your career in trading, low risk trading is still better than high risk trading because it's hard to keep consistency on profit with high risk than low risk. Usually, high risk trading is used for gaining a lot of profits in short time and it won't happen many times. And also, high risk trading will be better if you used it with small amount of capital.

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  6. #115
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    Quote Originally Posted by andry777 View Post
    Different traders could have different consideration and different mind to choose high risk trading or low risk trading. But for long-term of your career in trading, low risk trading is still better than high risk trading because it's hard to keep consistency on profit with high risk than low risk. Usually, high risk trading is used for gaining a lot of profits in short time and it won't happen many times. And also, high risk trading will be better if you used it with small amount of capital.
    Yes sir, lots of things are happening to varying forex traders without much defense of the reason why they trade at times. I also believe that trading in the market should never be done with high risk if the trader wants to survive in the market. I have seen many traders losing in this market, and if you trace it well, it is because of the high risk they are taking, it is too much.

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  7. #116
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    Quote Originally Posted by techboy View Post
    Commitment in trading is a must if we want to be a successful trader, whether we use manual trading system or via EA it requires commitment, being a successful traders requires time, years of constant practice and learning is a must before an aspiring trader becomes profitable.
    During trading, forex traders should know what they are doing, this is why i support you my friend, when you are trading without know why you trade and you are not committed to it, it is a disaster in disguise. Yet, the EA does not need commitment, it is the manual trading which needs it.

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  8. #117
    Trader techboy's Avatar
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    Quote Originally Posted by silverlady View Post
    During trading, forex traders should know what they are doing, this is why i support you my friend, when you are trading without know why you trade and you are not committed to it, it is a disaster in disguise. Yet, the EA does not need commitment, it is the manual trading which needs it.
    Using an EA also requires time and dedication, because its not automatic that a particular EA will be profitable, it also requires time for testing, tweaking of parameters and selecting the right EA to use, so its like also creating a manual strategy though its not that tedious. Other trader may just simply buy an EA and plug in to their platform only to loss big in the end.

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    " Trading is 70% Psychology, 15% Risk Management and 15% Strategy ! "

  9. #118
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    Quote Originally Posted by techboy View Post
    Using an EA also requires time and dedication, because its not automatic that a particular EA will be profitable, it also requires time for testing, tweaking of parameters and selecting the right EA to use, so its like also creating a manual strategy though its not that tedious. Other trader may just simply buy an EA and plug in to their platform only to loss big in the end.
    No matter what the trader is trying to use in the market, he will have to know how it is working and the best parameters and settings that would be working with it. This same thing goes to the trading of EAs, the setting matters, and the EAs has their risk in the way the trader set things, just like the manual trading itself.

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  10. #119
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    Quote Originally Posted by cozard007 View Post
    No matter what the trader is trying to use in the market, he will have to know how it is working and the best parameters and settings that would be working with it. This same thing goes to the trading of EAs, the setting matters, and the EAs has their risk in the way the trader set things, just like the manual trading itself.
    True, because EA's are based by manual system which is also created by traders, so if the system is a good then perhaps the EA will also perform good during trading, so its a matter of selecting the right EA and tweaking at the right settings, but still its important to know the strategy used in a particular EA, rather than use it blindly.

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    " Trading is 70% Psychology, 15% Risk Management and 15% Strategy ! "

  11. #120
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    Quote Originally Posted by samprazaan View Post
    have a strong commitment will make them do trading with follow the rules, of course, because this is the foundation for them,
    but some words about automatic trading or robot, there is no emotion in there, there is advantages and disadvantages, but this is not a solution for them who want to grow to be a real trader
    Commitment for trader to focus on the loss rasio before enter the trade. High risk and high return must be mange by the good attitude. well trader just focus on the return on forex make trader more be emotionally influenced. I think trader should understand the different of those both

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