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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. #281
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    First I think it is more better to trade on low risk, when we do that then I am sure we would be able to make money consistently, even though we later loss our money, so therefore to make money in forex trading, we have to make sure that we know how to handle to market, it is important, taking higher risk to me is not a better way of becoming successful.

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  3. #282
    Trader cutiekc's Avatar
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    Well, people would think that higher risk trading would make them make money, but I doubt, I have been in the market for some time, I know how the market works, higher risk trading will only make you loss your money. In the sense that no matter what, you can not be perfect in the market, you will still do some mistakes, that means to make money what you will be needing is to consider risk and then take as low as possible risk.

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  4. #283
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    Quote Originally Posted by cutiekc View Post
    Well, people would think that higher risk trading would make them make money, but I doubt, I have been in the market for some time, I know how the market works, higher risk trading will only make you loss your money. In the sense that no matter what, you can not be perfect in the market, you will still do some mistakes, that means to make money what you will be needing is to consider risk and then take as low as possible risk.
    [lang=id]that is true, because for some traders, they can make good earning with take higher risk, and they can repeat it again and again, but it will need extra ability to stay in this business, good managements is required and also accuracy to put the position,
    but unfortunately, it will not work well for all traders and then why better to trade with low risk[/lang]

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  5. #284
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    Quote Originally Posted by samprazaan View Post
    [lang=id]that is true, because for some traders, they can make good earning with take higher risk, and they can repeat it again and again, but it will need extra ability to stay in this business, good managements is required and also accuracy to put the position,
    but unfortunately, it will not work well for all traders and then why better to trade with low risk[/lang]
    it is bad for traders to rely on the making of money through the high risk in the forex business, that is going to soon land the trader in trouble of tehir trading, and the best to which traders could get is to have low risk and effective risk management.

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  6. #285
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    Well, there is the mentality that every traders do have, thus thinking that they will be able to earn good amount of money from forex when they start taking higher risk, but no, that is not it, they are causing themselves emotional harms and also would be wasting their hard earned money.

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  7. #286
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    Quote Originally Posted by splash View Post
    Well, there is the mentality that every traders do have, thus thinking that they will be able to earn good amount of money from forex when they start taking higher risk, but no, that is not it, they are causing themselves emotional harms and also would be wasting their hard earned money.
    it is not the safest way to trade by making the high risk in the forex business. the emotion is going to set in when the trader is not careful with what they do in the forex business and that is not going to have the good ending for the trader.

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  8. #287
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    Quote Originally Posted by silverlady View Post
    it is not the safest way to trade by making the high risk in the forex business. the emotion is going to set in when the trader is not careful with what they do in the forex business and that is not going to have the good ending for the trader.
    [lang=id]do trading with high risk will put them on danger position when they have a little mistake in the market, hard for them to get the right thing at this position, and will give them big losing for that, so better for them to take this business properly where the risk is limited with well[/lang]

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  9. #288
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    Quote Originally Posted by silverlady View Post
    it is not the safest way to trade by making the high risk in the forex business. the emotion is going to set in when the trader is not careful with what they do in the forex business and that is not going to have the good ending for the trader.
    high risk will give them good profit and if traders get the right way in the market, but the risk here will wipe them faster when they make a mistake , that is the consequences for them, but traders will make the choice for this, some typical about them will take trading with high risk and feel enjoy it too

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  10. #289
    Trader techboy's Avatar
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    Quote Originally Posted by samprazaan View Post
    [lang=id]do trading with high risk will put them on danger position when they have a little mistake in the market, hard for them to get the right thing at this position, and will give them big losing for that, so better for them to take this business properly where the risk is limited with well[/lang]
    True, trading with bigger lot sizes will put our capital in danger, and we will be prone to make more mistakes once we experience consecutive loses because we want to recover our loses quickly,it is important that traders will always follow proper risk management approach otherwise we will just end up a loser.

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

  11. #290
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    Well it depends on your capital and you strategy how much you can take risk people who have huge capital also look for low risk to make suitable money according to the capital and people with low capital also take high risk to make money from trading.

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