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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. #31
    Trader techboy's Avatar
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    Quote Originally Posted by andry777 View Post
    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.
    I dont think that martingale is a safe approach for traders even if they are already has long history of being a profitable trader, market has full of uncertainties and nobody can guarantee that your consecutive loses wont go beyond 3 trades, trading with bigger lot sizes always poses bigger risk for any trader.

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

  3. #32
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    Quote Originally Posted by techboy View Post
    I dont think that martingale is a safe approach for traders even if they are already has long history of being a profitable trader, market has full of uncertainties and nobody can guarantee that your consecutive loses wont go beyond 3 trades, trading with bigger lot sizes always poses bigger risk for any trader.
    I know martingale very well I know it first with the robots trading, and the robots makes huge money if the market is favourable or trending or reversing very strongly. But when the market is deceptive, the robots losses all the money with martingale strategy, this is not advisable to me, It is a very high risk trading and it is not advisable.

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  4. #33
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    I think taht the trading processes may get us many features only if we will; be able to think of the matters which may push us to think of the ways of the understanding the market and its ways for the trading . here we are to search for new approaches not only ways of analyzing

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  5. #34
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    Quote Originally Posted by cozard007 View Post
    I know martingale very well I know it first with the robots trading, and the robots makes huge money if the market is favourable or trending or reversing very strongly. But when the market is deceptive, the robots losses all the money with martingale strategy, this is not advisable to me, It is a very high risk trading and it is not advisable.
    I have not used yet automated trading systems or robots yet. I would like to try an automated trading software some day but 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.

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  6. #35
    Trader lawners1791's Avatar
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    those of the decision should had as trader to occupy the distinct on use with the choice of system to work with the manage of the good trading plan, as each to refer with the distinct on details on customs of strategic preference with the level on expends with the risks and target to complete with the good terms.

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  7. #36
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    Forex is an international business. It is not a game. It is a money making making business. Sitting in the native country we can earn dollar. There is a good saying-----no risk no gain. But risk should be taken carefully. Otherwise your account will be zero.

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  8. #37
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    Quote Originally Posted by Sonia View Post
    Forex is an international business. It is not a game. It is a money making making business. Sitting in the native country we can earn dollar. There is a good saying-----no risk no gain. But risk should be taken carefully. Otherwise your account will be zero.
    Well, the forex is good, but we should try to be more careful in its dealings, the risk is what we should be very careful about. I would mainly advice traders that the risk taking should be very little, if the risk is little , then it would guaranty the safety of the trader. Also, I so much believe in the way the trader pans to manage his risk.

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  9. #38
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    there are many traders who sees that the more that balance is the more the profit will be . but this my include high risk trading . and we may not be able to manege our money well so the result may come false and reverse us . so that we have to trade is low risk trades to be able to control our way of the trading.

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  10. #39
    Trader lawners1791's Avatar
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    lower risks trading those gives with the better chance as trader might focusing of more with the deeper on appreciation with the manage on working with the system evaluation and the improvesment on gaining of the better results with the future as sustaining of the longer on terms with the trading business.

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  11. #40
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    Quote Originally Posted by hosny55 View Post
    there are many traders who sees that the more that balance is the more the profit will be . but this my include high risk trading . and we may not be able to manege our money well so the result may come false and reverse us . so that we have to trade is low risk trades to be able to control our way of the trading.
    It is good to know the calculation of your trading balance so that you can work well with it. In this regard, traders should have the calculative plans on the market trading, and the traders would know the amount of money they would risk per time, and the management of usage they will always be getting in the market.

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