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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. #41
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    Quote Originally Posted by cozard007 View Post
    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.
    Our trading balance is our money and we cannot be careless with it. We should calculated what we can risk in any trade. Good planning can help trader trade more efficiently. Forex trade can be a money making machine if and when a trader turns it into one. Until then, it can be such a waste pipe and that is exactly what it is to many wanna be traders. Anyone that plans on succeeding in forex must never come to the market with half baked knowledge.

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  3. #42
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    Quote Originally Posted by shivanandfx View Post
    Our trading balance is our money and we cannot be careless with it. We should calculated what we can risk in any trade. Good planning can help trader trade more efficiently. Forex trade can be a money making machine if and when a trader turns it into one. Until then, it can be such a waste pipe and that is exactly what it is to many wanna be traders. Anyone that plans on succeeding in forex must never come to the market with half baked knowledge.
    Most of forex trader's are not very caring about their trading balance and they are following careless trading most of time in forex which is more risky for their trading balance and trading career. Along with good planning trader's need a good learning on a regularly bases, because we can create plans but to implement them in real trading account we have to do practical work too.

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  4. #43
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    Quote Originally Posted by shivanandfx View Post
    Our trading balance is our money and we cannot be careless with it. We should calculated what we can risk in any trade. Good planning can help trader trade more efficiently. Forex trade can be a money making machine if and when a trader turns it into one. Until then, it can be such a waste pipe and that is exactly what it is to many wanna be traders. Anyone that plans on succeeding in forex must never come to the market with half baked knowledge.
    It is not a matter of thinking you can not be careless with your trading balance, it is the matter of not being careless with it. Forex tardesr should try so well so that they do not do trading under too much high risk, it is very kind of many traders to also apply good trading management in what they are ever trading.

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  5. #44
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    Quote Originally Posted by Hukam View Post
    Most of forex trader's are not very caring about their trading balance and they are following careless trading most of time in forex which is more risky for their trading balance and trading career. Along with good planning trader's need a good learning on a regularly bases, because we can create plans but to implement them in real trading account we have to do practical work too.
    they do not care of this matter and they lose since they do not look at the safety of the balance before trying to place the trade which is mightier than the account they are having, this is leading straight to margin call. Traders need to work with the risk and prepare for the losses which the risk may make them have with the trade.

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  6. #45
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    I wouldn't want to mislead some traders, but then I know that forex trading is a good business and we can make good amount of money from it.

    For me when I see some good trading opportunity, I am always taking it with higher risk, thus I forget the risk I want to take, in as much as I am following the trend, there might be some pull back but I am sure that the market will go accordingly, but this I don't do at all times.

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  7. #46
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    Quote Originally Posted by cozard007 View Post
    It is not a matter of thinking you can not be careless with your trading balance, it is the matter of not being careless with it. Forex tardesr should try so well so that they do not do trading under too much high risk, it is very kind of many traders to also apply good trading management in what they are ever trading.
    It is important to apply good money management and risk management in forex trading but traders should trade with high risk percentage of profit and high risk in amount of dollars. Good money management is important because if traders made mistake with high risk in their money management then it can cause big loss or even Margin Call in short time. This is very bad idea for traders to trade with high risk.

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  8. #47
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    to risks of small parts with the margin on working with the manage of the trading jobs on running the sets of rules as presettled with the beginning starts on entering plan to gains of returns as occupying use of system with the proven performance on sustaining the complete with the terms of the trading plan.

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  9. #48
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    Quote Originally Posted by andry777 View Post
    It is important to apply good money management and risk management in forex trading but traders should trade with high risk percentage of profit and high risk in amount of dollars. Good money management is important because if traders made mistake with high risk in their money management then it can cause big loss or even Margin Call in short time. This is very bad idea for traders to trade with high risk.
    this management is what is sustaining traders which are doing forex, traders who do forex can trade for nay reason, this is not the thing that brings money. What brings money is not trading mainly, the risk and way of controlling trader is large prat of this, it should not be taken with simple hand.

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  10. #49
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    Quote Originally Posted by andry777 View Post
    It is important to apply good money management and risk management in forex trading but traders should trade with high risk percentage of profit and high risk in amount of dollars. Good money management is important because if traders made mistake with high risk in their money management then it can cause big loss or even Margin Call in short time. This is very bad idea for traders to trade with high risk.
    It is good to apply wisdom to this sir, there are lots of traders that are willing to take the risk in this market all the time, but they will be losing if they do not know how to control and manage the risk they are taking, I will only advice that traders should take the risk based on what they could control in the market.

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  11. #50
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    Quote Originally Posted by cozard007 View Post
    It is good to apply wisdom to this sir, there are lots of traders that are willing to take the risk in this market all the time, but they will be losing if they do not know how to control and manage the risk they are taking, I will only advice that traders should take the risk based on what they could control in the market.
    Yeah, traders shouldn't risk more than they could afford to take when the market didn't move as expectation. Anything can happen in the market, high risk has its advantage when you made good analysis because it can give you high return in short time. But in the same time, it can cause big loss too when your analysis was wrong. Maybe it is possible to be used sometime when you had great confidence with certain condition of market and you think it's big chance to gain big profit in short time but still, you should remember the risk too before decided to trade with high risk.

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