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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. #21
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    Quote Originally Posted by Khimi234 View Post
    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.
    It is true, the strategy of the trader would be part of what would determine the risk of the trader. Meanwhile, it is very good to know that the risk is not that simple to over look. Forex traders should always try as much as possible to trade with lower risk, this is better than taking higher risk. I do take higher risk at times though, but I would have seen that the trend is strong and I will have my tight stop loss with it.

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    Quote Originally Posted by cozard007 View Post
    It is true, the strategy of the trader would be part of what would determine the risk of the trader. Meanwhile, it is very good to know that the risk is not that simple to over look. Forex traders should always try as much as possible to trade with lower risk, this is better than taking higher risk. I do take higher risk at times though, but I would have seen that the trend is strong and I will have my tight stop loss with it.
    Yes low risk trading is good for trader's. Even in long term trending market we could increase the size of our risk but there is no probability of gaining money with a correct market analysis all the time. So better to use low risk and we can increase the size of our lot size according to the market trend condition, we should start with 2 percent per trade risk, and later if market is under your control then you can increase your risk, but make sure that your stop loss should be covered only 2 percent risk of your whole trading account if market comes back to you the other thing is to lock our trade by using stop loss on every breakout.

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  4. #23
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    Quote Originally Posted by Earnperfect View Post
    Yes low risk trading is good for trader's. Even in long term trending market we could increase the size of our risk but there is no probability of gaining money with a correct market analysis all the time. So better to use low risk and we can increase the size of our lot size according to the market trend condition, we should start with 2 percent per trade risk, and later if market is under your control then you can increase your risk, but make sure that your stop loss should be covered only 2 percent risk of your whole trading account if market comes back to you the other thing is to lock our trade by using stop loss on every breakout.
    Very good sir, but do not mistaken my words, the both high risk or low risk are good for traders, it only depends on how the trader could manage things out. Forex traders need to be very skillful in management if their account based on the risks they are taking. It is very common to risk high, but do so if you have the verves abd good management for it. Else, use low risk for it is safer.

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  5. #24
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    Quote Originally Posted by Earnperfect View Post
    Yes low risk trading is good for trader's. Even in long term trending market we could increase the size of our risk but there is no probability of gaining money with a correct market analysis all the time. So better to use low risk and we can increase the size of our lot size according to the market trend condition, we should start with 2 percent per trade risk, and later if market is under your control then you can increase your risk, but make sure that your stop loss should be covered only 2 percent risk of your whole trading account if market comes back to you the other thing is to lock our trade by using stop loss on every breakout.
    Low risk is better for trading than high risk especially if you're using huge capital for trading. It's no need to risk high but you only need to keep consistency on profit with low risk but if you're using low capital then low risk trading will be boring because you got only small amount of profits too. So, it is important for trading to remember that the purpose in trading when you're still beginner with small amount of capital, it is not gaining big profit but how to realize consistent profit. Once you could make it happen, you can increase the amount of profit with higher lot size.

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  6. #25
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    low risks as keeping of the manage on running of the series on works with the system evaluation on improving of the better accuracy on earning with the secure on ways as submitting of risks with the requests on achieving goals of the target to complete by the ends of the good terms.

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  7. #26
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    Quote Originally Posted by andry777 View Post
    Low risk is better for trading than high risk especially if you're using huge capital for trading. It's no need to risk high but you only need to keep consistency on profit with low risk but if you're using low capital then low risk trading will be boring because you got only small amount of profits too. So, it is important for trading to remember that the purpose in trading when you're still beginner with small amount of capital, it is not gaining big profit but how to realize consistent profit. Once you could make it happen, you can increase the amount of profit with higher lot size.
    Trading with small risk can help us remain cool all through our trading and avoid shocks and panic, You can risk even smaller amount if you are a scalper and high a very high win ratio. because in trading, draw downs occur and you could get wiped out easily. Following risk management is not an option but a necessity in trading.

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  8. #27
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    Quote Originally Posted by cozard007 View Post
    It is true, the strategy of the trader would be part of what would determine the risk of the trader. Meanwhile, it is very good to know that the risk is not that simple to over look. Forex traders should always try as much as possible to trade with lower risk, this is better than taking higher risk. I do take higher risk at times though, but I would have seen that the trend is strong and I will have my tight stop loss with it.
    high risk trading can work well with a strong confirmation of bullish or bearish market trend. There is no problem to use a high risk in trading if we are sure that market will remain bullish for bearish for a very long time, or market trend will be up or down. But due to fundamental affect, its very hard to judge the market trend direction some time.

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  9. #28
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    Quote Originally Posted by Hukam View Post
    high risk trading can work well with a strong confirmation of bullish or bearish market trend. There is no problem to use a high risk in trading if we are sure that market will remain bullish for bearish for a very long time, or market trend will be up or down. But due to fundamental affect, its very hard to judge the market trend direction some time.
    You ar4 sharing the same view with me on this high risk sir, but it is good to trade the high risk with the professional traders alone. It is not good for the beginning traders, and if a trader wants to be reasonable and more conservative, I do not think high risk is a good idea. But it is good if you know the smarts way out and the way to manage the high risk.

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  10. #29
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    some times I have some ideas that feel of the nature of the trading in the Forex market , and they are to use as little as lot size comparing to our balance . here we are having two situations . profit is less also the loss is less they will not harm our balance at all .

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  11. #30
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    Quote Originally Posted by cozard007 View Post
    You ar4 sharing the same view with me on this high risk sir, but it is good to trade the high risk with the professional traders alone. It is not good for the beginning traders, and if a trader wants to be reasonable and more conservative, I do not think high risk is a good idea. But it is good if you know the smarts way out and the way to manage the high risk.
    You're right. Trading with high risk is better for professional traders because they could manage the risk and gain more profits than losses. Usually, expert traders would use martiangle method in order to gain big profits in short time because expert traders won't make mistakes more than 3 times in a row so they could recover previous loss with current transaction and using double lot size. But they should be ready with the worst possibility too (lose all of the capital) when they trade with high risk.

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