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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. #51
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    It is better to use percentage trading risk. The risk is along the percentage. If trader try to choose 5% risk on each positiion, while an account is about 2000USD, trader can use 100usd risk per position. It is better risk percentage than 10 % risk per trade.

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  3. #52
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    Quote Originally Posted by andry777 View Post
    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.
    Even expert traders do not ignore risk management.Trading with small risk can help us remain cool all through our trading and avoid shocks and panic, we can risk even smaller amount if we are a scalper and have a very high win ratio. because in trading, draw downs occur and we could get wiped out easily.

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  4. #53
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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.
    Forex is high risk when we dont know the correct means of trading. I have 2 live trading accounts and I trade it all at the same time using my own strategy. so I usually trade on different currency pairs one currency pair for each account. These to diversify my account and minimize the risk.

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  5. #54
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    It all depends because some time I trade on higher risk and some other time on low risk the thing that matters is the reason why I am trading, I mean the signals.

    because experience has got to let me know that there are some trading opportunity which when see could help move the market more far.

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  6. #55
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    when we ask a trader which do you like best high risk trading or low risk trading ? he may answer us many answers depending on the way he treats with the market with . and depending also on the time he want to spend in the trading . i think that the low risk trading is the better than the high risk trading

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    Quote Originally Posted by Khimi234 View Post
    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.
    yes those happened as the situation run with the different returns on excess as trader to work of the harder as expending more with the better decision to gives of appeals with the running position of accounts.
    as deliberating the use of means and the rules with the strategy on securing funds and the good focus on keeping of the customs on sustaining of the longer terms on working of tasks with the parts of the trading jobs.

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  8. #57
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    Quote Originally Posted by splash View Post
    It all depends because some time I trade on higher risk and some other time on low risk the thing that matters is the reason why I am trading, I mean the signals.

    because experience has got to let me know that there are some trading opportunity which when see could help move the market more far.
    It seems every trader can decide the trading low risk and also high risk based on the mood. May trader can choose different risk level of trading at any time of the mood. Trader can do that too. But remember, trading with moody is not good trading because it is the part of the emotional trading. The mood is emotional matter

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  9. #58
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    Quote Originally Posted by aris90 View Post
    It seems every trader can decide the trading low risk and also high risk based on the mood. May trader can choose different risk level of trading at any time of the mood. Trader can do that too. But remember, trading with moody is not good trading because it is the part of the emotional trading. The mood is emotional matter
    Whether we will be trading on higher risk or not, the most important thing is that experience is what that matters.

    To me, I make use of the candle stick pattern and I know when to take more higher risk. Experience has so much to teach us on forex trading, though we need to thus be careful.

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  10. #59
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    Quote Originally Posted by hosny55 View Post
    when we ask a trader which do you like best high risk trading or low risk trading ? he may answer us many answers depending on the way he treats with the market with . and depending also on the time he want to spend in the trading . i think that the low risk trading is the better than the high risk trading
    I have traded both the high risk and low risk trading, and I had success in both of them. I think it is the way the trader reason and trades it. If you have the affinity for risk taking, you might plan well on high risk and be using it to make more money. You would have to plan very well for this to happen though. And agree to what you have said, it is safer to take low risk trading.

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  11. #60
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    I think the trader that makes use of higher risk trading are just wanting to make some fast money from the business, thus so many of them loss their money as well.

    Therefore to me, I think that experience is the best teacher, so therefore experience will tell and teach us on when we can increase the risk so as to enable us make money.

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