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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. #121
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    They say the professional trader trades based on fixed trades. Thus fixed risk and money management, but then through my experience that is not true, because all trade setup are not the same, thus some risk will possibly be higher than the other one, but then still the risk has to be the amount of money that we can afford losing and experience would teach us what to do and when to do it.

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  3. #122
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    Quote Originally Posted by splash View Post
    They say the professional trader trades based on fixed trades. Thus fixed risk and money management, but then through my experience that is not true, because all trade setup are not the same, thus some risk will possibly be higher than the other one, but then still the risk has to be the amount of money that we can afford losing and experience would teach us what to do and when to do it.
    i hear that too, and i believe it is true my friend. the professional traders are unique for the way they are doing their business, and i believe that way will be fixed as people have being claiming. It is not the main thing to me, if there is money, skills and management, it will be easy for traders to work it through.

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  4. #123
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    Quote Originally Posted by splash View Post
    They say the professional trader trades based on fixed trades. Thus fixed risk and money management, but then through my experience that is not true, because all trade setup are not the same, thus some risk will possibly be higher than the other one, but then still the risk has to be the amount of money that we can afford losing and experience would teach us what to do and when to do it.
    Well, it is not true in my own experience too, because nothing is fixed in the forex market. This is why no trader would do thing fixed and be expecting money in the market. What I really understand is how traders are using what they know to get what they want, and the market is never certain, it is dynamic, the application of the trader would not be same as well.

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  5. #124
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    Quote Originally Posted by cozard007 View Post
    Well, it is not true in my own experience too, because nothing is fixed in the forex market. This is why no trader would do thing fixed and be expecting money in the market. What I really understand is how traders are using what they know to get what they want, and the market is never certain, it is dynamic, the application of the trader would not be same as well.
    True, nothing is fixed but as long that we follow a good strategy, implement good risk management approach with good psychology in a consistent basis we will be profitable in the long run, market is dynamic and unpredictable but if we are focused in what we are doing we will possibly reach our goals.

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

  6. #125
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    Quote Originally Posted by cozard007 View Post
    Well, it is not true in my own experience too, because nothing is fixed in the forex market. This is why no trader would do thing fixed and be expecting money in the market. What I really understand is how traders are using what they know to get what they want, and the market is never certain, it is dynamic, the application of the trader would not be same as well.
    There is nothing certain in forex business so there is no fixed thing in forex although you had good strategy to follow. It is still important for traders to keep update the strategy and fix something in order to gain more profits and lowering the loss (possibility and amount of loss) in trading. So, traders need to trade with low risk because the main purpose is not gaining big profits in single transaction but how to keep consistency on profit so traders need to limit the risk in each transaction.

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  7. #126
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    I realized many thing while I am trading, I realized that the true success is not in the trading of the market with high risk, but the certainty of the trader in the market. If the trader could be using low risk and be stabilized, the trader is better than the trader that takes high risk and gain once and lose all the money in the next trade.

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  8. #127
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    [lang=id]the experts or professional traders will know how to trade properly, they knew the time for trading with use their own setting riks and for how much that will taken, and many of them suggest us to trade on the safest way and means with just take low risk, step by step we can make it grow and if only we know how to do the right thing, but it does not mean that high risk is always not good to be used, traders have to understand this part[/lang]

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  9. #128
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    Quote Originally Posted by samprazaan View Post
    [lang=id]the experts or professional traders will know how to trade properly, they knew the time for trading with use their own setting riks and for how much that will taken, and many of them suggest us to trade on the safest way and means with just take low risk, step by step we can make it grow and if only we know how to do the right thing, but it does not mean that high risk is always not good to be used, traders have to understand this part[/lang]
    Professional or successful traders has different mindset that those with struggling traders,they know that they cant win all the time, they know that trading is about minimizing the risk and taking high risk approach will not give them profits,it is really about the implementation that matter, some traders knows it but cannot implement.

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

  10. #129
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    Quote Originally Posted by cozard007 View Post
    I realized many thing while I am trading, I realized that the true success is not in the trading of the market with high risk, but the certainty of the trader in the market. If the trader could be using low risk and be stabilized, the trader is better than the trader that takes high risk and gain once and lose all the money in the next trade.
    That is the point, we need to risk what we can afford, that is business as we are not certain, but then if our trading strategy should be working more of the time we can succeed by trading low risk. And when we allow experience to lead us, time shall come when we will be able to know when to risk much in forex trading at the right time, for now I am on low risk trading.

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  11. #130
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    Quote Originally Posted by techboy View Post
    Professional or successful traders has different mindset that those with struggling traders,they know that they cant win all the time, they know that trading is about minimizing the risk and taking high risk approach will not give them profits,it is really about the implementation that matter, some traders knows it but cannot implement.
    [lang=id]yes, traders just need to try to minimize the risk , this is about increasing quality in this business where the traders can manage trading forex with well, and it means, they understand the system, risk management and also money management, but it is good too for them to improve themselves for some condition and if really sure about it,[/lang]

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