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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. #11
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    Quote Originally Posted by Khimi234 View Post
    Good explanation sir, by reading this post everyone can say easily that forex trading is not a very risky business. Its totally depend upon us that how we are taking risk here and which lot size we are using in trading. Most of trader's use a very big risk and lot size with $1000 capital on the other hand we can make our trading very easy by using 0.01 lot size in $1000 investment.
    i guess we do not need to take the lower risk for trading for our safety and even just a wasted time and also will not grant to get success too, all the thing here depend to us who manage the business with well, how good the understanding we have had to analyze the market, how good we can handle and recover some condition
    and the important thing for us that we only need to trade with flexible and realistic to follow the market, never jump to get one stage in front of the market price, so set the risk wisely,

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  3. #12
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    I tried to feel of the trading with high volumes and the low vlumes . found that when I trade the low volumes I`m very calm and self confident . have no thing to worry about . but the contrary when I try a huge lot size . i wait the market to move even a small amount of pips . and it is so bad to wait for the market to move in a certain direction

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  4. #13
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    Quote Originally Posted by newentry View Post
    i guess we do not need to take the lower risk for trading for our safety and even just a wasted time and also will not grant to get success too, all the thing here depend to us who manage the business with well, how good the understanding we have had to analyze the market, how good we can handle and recover some condition
    and the important thing for us that we only need to trade with flexible and realistic to follow the market, never jump to get one stage in front of the market price, so set the risk wisely,
    we know forex trading is high risk, Loss is the probability , because the price of which is always moving and dynamic.* We then loss of open positions, do not panic or shock, because when we open position fixed price move and our position is not in line with market movements, but if we believe the analysis that previously had been carefully considered and carefully we will get a profit, wait only a matter of time waiting for gradual loss into a profit.

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    Trader Azis Muslim's Avatar
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    Well I never doubt that anyone can get some winning trades with such amount of deposit, $2000. But what about to those who trade in less deposit such as $100? I think that's the difference between the good and standard trader. Honestly, we can easily get profit at least $10 using big deposit, right? But the challenge are located in the choices of leverage and deposit amount. I would prefer to congratulate traders who able to survive from small deposit rather than a big one.

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    Quote Originally Posted by Azis Muslim View Post
    Well I never doubt that anyone can get some winning trades with such amount of deposit, $2000. But what about to those who trade in less deposit such as $100? I think that's the difference between the good and standard trader. Honestly, we can easily get profit at least $10 using big deposit, right? But the challenge are located in the choices of leverage and deposit amount. I would prefer to congratulate traders who able to survive from small deposit rather than a big one.
    Its really not much difference if you trade 2,000 dollars or 100 dollars if you know how to trade properly and how you can compute profit. For example if you want to target 1% profit in forex trading then if you have 2,000 dollars you earn 20 dollars profit if you have 100 dollars then you earn 1 dollar profit. Its still the same 1% earning.

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  7. #16
    Trader Hukam's Avatar
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    Quote Originally Posted by Azis Muslim View Post
    Well I never doubt that anyone can get some winning trades with such amount of deposit, $2000. But what about to those who trade in less deposit such as $100? I think that's the difference between the good and standard trader. Honestly, we can easily get profit at least $10 using big deposit, right? But the challenge are located in the choices of leverage and deposit amount. I would prefer to congratulate traders who able to survive from small deposit rather than a big one.
    Mate the main purpose should be to do trade with proper management. We should have a good clear idea about our risk management. Its very essential that we are following forex rules in all types of deposits. Small deposit and big deposit both are same if we are following a good discipline in trading. The differ will be only about profit. In small deposit we will earn less and with big deposit we will gain big profit.

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  8. #17
    Trader kie202's Avatar
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    When a good plan, things will certainly work with the trader. There is a high risk of some traders, it will even make them earn more money when they have their management to it, anyone who plans to be successful in forex should never come to market, with the advantage we produce small lots will not justify the amount we invested.

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  9. #18
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    Quote Originally Posted by Hukam View Post
    Mate the main purpose should be to do trade with proper management. We should have a good clear idea about our risk management. Its very essential that we are following forex rules in all types of deposits. Small deposit and big deposit both are same if we are following a good discipline in trading. The differ will be only about profit. In small deposit we will earn less and with big deposit we will gain big profit.
    That is just it sir, the main thing is to know what you want, and do it has you have known what you want. The way traders are getting money is primarily based on how traders are careful in making their analysis, and the way they are doing the management as well. Low or high risk would be absorbed by the level of work.

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  10. #19
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    Quote Originally Posted by Khimi234 View Post
    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.
    It is better to use risk percentage based on the account. So trader has the exact parameter to use the percentage of risk. Just example, trader choose to use pip margin about 1000 pip to get margin call. and trader use 0.01 lot in the 100USD, and if trader want to get more capital just 2000USD, trader can use 0.2 lot. It is the exact percentage.

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  11. #20
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    Quote Originally Posted by aris90 View Post
    It is better to use risk percentage based on the account. So trader has the exact parameter to use the percentage of risk. Just example, trader choose to use pip margin about 1000 pip to get margin call. and trader use 0.01 lot in the 100USD, and if trader want to get more capital just 2000USD, trader can use 0.2 lot. It is the exact percentage.
    Risk management is totally depend upon our trading strategy, In long term trading strategies we can take risk like 3 to 4 percent for each. But for a short term trading goal we should take risk of 1 risk of equity for each trade. 2000 USD is a very good amount and I think trading with 0.10 and 0.20 could be a very good idea. I personally check risk management directly and along with it I check risk and reward each time in my trade.

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