There's no such thing as "low risk" | Forex Factory

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There's no such thing as "low risk"

  • #1
  • First Post: Aug 11, 2020 12:25pm Aug 11, 2020 12:25pm
Don't tell me that you trade "low risk" because you use a SL, please!
even if you risk 0.1%/trade and you are super diversified you are still trading high risk.......... why ?


because your money is in a broker's bank account.

"but I'm using an amzing system"


no one has the magic wand, nobody knows for sure what is going to happen.. not even central banks. all you have is predictions and anticipations.


I don't believe "low risk" exists in FX.
  • #2
  • Aug 11, 2020 12:48pm Aug 11, 2020 12:48pm
I have to disagree with you about trading risk levels.

Quoting HeyYou
Don't tell me that you trade "low risk" because you use a SL, please! even if you risk 0.1%/trade and you are super diversified you are still trading high risk.......... why ? because your money is in a broker's bank account.
Your money being in a brokers bank account has nothing to with the risk you take per trade...if you are worried about keeping funds in a particular broker than you probably should not be trading with them at all...

Quote
no one has the magic wand, nobody knows for sure what is going to happen.. not even central banks. all you have is predictions and anticipations.
I don't believe "low risk" exists in FX.

You are right, no one knows what is going to happen, that is why you should never risk everything on one trade. Not even professionals do that, and there is a good reason for it.

Risk can be defined in many ways, can be diversified among multiple assets etc. The reason why professionals use "low risk" or less than 1% of risk per trade on average is because they know that they have an edge, and overtime they will turn a profit, however a string of losses in any trading system is possible. So, if you were to risk to much on one trade, then you may empty your account before you are able to make any profit. It is really a numbers game at the end of the day, so understanding risk is one of the most important things any trader needs to do when developing a trading plan.

Another reason for this is psychology, most people are not comfortable with taking big risks on one trade, so they would feel much more comfortable with losing 1% on a trade rather than 10%, this is called "risk tolerance".

Risk is a complicated subject, and it varies among personalities in different people. It is also subjective, so low risk to me may be high risk to you etc.
  • #3
  • Aug 11, 2020 1:00pm Aug 11, 2020 1:00pm
Quoting viptrading
because they know that they have an edge,

the edge is always statistical.

Quoting viptrading
n a particular broker

any broker can go bankrupt/insolvent overnight!! just look at alpari UK, a large regulated broker.
  • #4
  • Aug 11, 2020 1:20pm Aug 11, 2020 1:20pm
Quoting HeyYou
{quote} the edge is always statistical. {quote} any broker can go bankrupt/insolvent overnight!! just look at alpari UK, a large regulated broker.
Yes, an edge is based on statistics and past trading experience. Also, for some the edge is simply the trader himself, who doesn't use a particular "strategy" but simply understands how to trade profitably. Even then as you said before no one is right 100% of the time, so using low risk on each trade is the path that most successful traders take.

Any broker can go bankrupt, however good brokers have legal requirements they need to uphold even in such cases. For example, some brokers will separate trades funds in a different account up to a certain amount based on the legal requirement in that country. These are all things that should be taken into account before choosing a broker to trade with. That being said, I always recommend to withdraw profits regularly, for me 50% of whatever profits made each month seems reasonable enough.

Also keep in mind that nothing in life is guaranteed, even a bank can go bankrupt, the economy can crash leaving your dollars worthless. These type of situations are possible in life, but the negative should not stop you from achieving your goals.
  • #5
  • Aug 11, 2020 1:36pm Aug 11, 2020 1:36pm
Quoting viptrading
{quote} Yes, an edge is based on statistics and past trading experience. Also, for some the edge is simply the trader himself, who doesn't use a particular "strategy" but simply understands how to trade profitably. Even then as you said before no one is right 100% of the time, so using low risk on each trade is the path that most successful traders take. Any broker can go bankrupt, however good brokers have legal requirements they need to uphold even in such cases. For example, some brokers will separate trades funds in a different account up to...

hahaha good one
  • #6
  • Aug 12, 2020 3:13am Aug 12, 2020 3:13am
It exist, just trade with money you can afford and not the money you need for living.

You see now, its riskless money! The broker is risking more if, you follow my advice.
Looking for profitable short term trades ...|
  • #7
  • Aug 14, 2020 4:02am Aug 14, 2020 4:02am
Broker choice is definitely a risk factor in trading but I'm not sure I agree it's the primary one. Do your due diligence in broker selection, make sure they are well regulated, etc. There are lots of sharks out there. I also use several both to spread my funds across them (i.e. diversify broker risk) but also as a back-up in case there are performance or service issues.
  • #8
  • Aug 14, 2020 4:25am Aug 14, 2020 4:25am
Quoting wongo
Broker choice is definitely a risk factor in trading but I'm not sure I agree it's the primary one. Do your due diligence in broker selection, make sure they are well regulated, etc. There are lots of sharks out there. I also use several both to spread my funds across them (i.e. diversify broker risk) but also as a back-up in case there are performance or service issues.
I've been eaten by a shark before, now use a few different brokers. Great advice wongo
  • #9
  • Aug 15, 2020 2:14am Aug 15, 2020 2:14am
If you mean the risk is always, that the money is in your brokers account and you have no access to it, independent of your trading strategy, than you are right.
But i think thats just a problem with all those bucket-shop Forex brokers with funny names. I dont know anybody who started to make decent profits with such a broker (i mean minimum 2000 USD/month and more) and got no troubles.
If you climb up the ladder to the next level "Futures account" you deal with much more serious companies, i guess.
  • #10
  • Aug 15, 2020 7:18am Aug 15, 2020 7:18am
Quoting HeyYou
Don't tell me that you trade "low risk" because you use a SL, please! even if you risk 0.1%/trade and you are super diversified you are still trading high risk.......... why ? because your money is in a broker's bank account. "but I'm using an amzing system" no one has the magic wand, nobody knows for sure what is going to happen.. not even central banks. all you have is predictions and anticipations. I don't believe "low risk" exists in FX.
If we look from this perspective, you can die while you're reading my comment. So we're always at risk, we just need to make better decisions to stay longer, and this decisions come from knowledge, research skills etc. These are my opinions.
  • #11
  • Aug 15, 2020 11:58am Aug 15, 2020 11:58am
Quoting wongo
Broker choice is definitely a risk factor in trading but I'm not sure I agree it's the primary one. Do your due diligence in broker selection, make sure they are well regulated, etc. There are lots of sharks out there. I also use several both to spread my funds across them (i.e. diversify broker risk) but also as a back-up in case there are performance or service issues.
There are indeed good brokers out there IMO.
I have been affiliated with a broker.... actually just for a month then I started to feel guilty lol
I realized that many ppl quit their jobs because they believe in "low risk" strategies etc. it sounds like a scam or an illusion to me.

even with the best broker in the world... trading is high risk business unless you diversify a lot... and I mean A LOT!!
  • #12
  • Aug 15, 2020 10:57pm Aug 15, 2020 10:57pm
Quoting HeyYou
{quote} There are indeed good brokers out there IMO. I have been affiliated with a broker.... actually just for a month then I started to feel guilty lol I realized that many ppl quit their jobs because they believe in "low risk" strategies etc. it sounds like a scam or an illusion to me. even with the best broker in the world... trading is high risk business unless you diversify a lot... and I mean A LOT!!
Yep! Let’s put it this way - I know a lot more people who have blown an account through their trading rather than broker choice!
  • #13
  • Aug 19, 2020 11:22am Aug 19, 2020 11:22am
Quoting wongo
{quote} Yep! Let’s put it this way - I know a lot more people who have blown an account through their trading rather than broker choice!

I agree... what's the need to widen spreads etc.
I actually lost faster with tight spreads.
high spreads and latency makes me think twice before opening a position. I experiencie this with stocks !

In any case, I consider low risk if:

1 you are very, very well capitalized,
2 you are very, very diversified
3 your returns are relatively low..about 3-5% / year. I'm pretty sure those who make more than 10%/year don't diversify that much!
  • #14
  • Aug 19, 2020 11:33am Aug 19, 2020 11:33am
Quoting HeyYou
{quote} I agree... what's the need to widen spreads etc. I actually lost faster with tight spreads. high spreads and latency makes me think twice before opening a position. I experiencie this with stocks ! In any case, I consider low risk if: 1 you are very, very well capitalized, 2 you are very, very diversified 3 your returns are relatively low..about 3-5% / year. I'm pretty sure those who make more than 10%/year don't diversify that much!
You're now talking about investing, not trading.
  • #15
  • Aug 19, 2020 11:42am Aug 19, 2020 11:42am
Quoting fuadik88
{quote} You're now talking about investing, not trading.
no, I'm a momentum investor. diversification doesn't mean trade only "value stocks".
  • #16
  • Aug 19, 2020 12:00pm Aug 19, 2020 12:00pm
Low risk, low returns

high risk, high returns

diversification is super complex and IMO it doesn't make any sense.
  • #17
  • Aug 19, 2020 12:05pm Aug 19, 2020 12:05pm
Quoting HeyYou
I don't believe "low risk" exists in FX.
Don't judge others by what YOU can do. I am sure you can't do many things, yet they are being done by others...can you fly a plane? Can you build a spaceship? Can you jump 2 meters high? There are many things you can't do, yet others can. And maybe there are things you can do and others can't. I hope you get my point.
Everyone can see the chart, but only a few can actually read it.
  • #18
  • Aug 19, 2020 12:21pm Aug 19, 2020 12:21pm
Quoting OnlineAddict
{quote} Don't judge others by what YOU can do. I am sure you can't do many things, yet they are being done by others...can you fly a plane? Can you build a spaceship? Can you jump 2 meters high? There are many things you can't do, yet others can. And maybe there are things you can do and others can't. I hope you get my point.

nope, I read academic studies that show how many are profitable in the long term...
  • #19
  • Aug 19, 2020 12:37pm Aug 19, 2020 12:37pm
Anyways I don't understand this attack, unless you are frustrated (losing a lot ?)

what I mean is that trading is high risk unless you are a bank basically. you can be very profitable even in the long term, but you can also lose and lose fast. that's it.
  • #20
  • Aug 19, 2020 12:38pm Aug 19, 2020 12:38pm
Quoting HeyYou
{quote} nope, I read academic studies that show how many are profitable in the long term...
What does that have to do with anything? Did you even read what I wrote? EVEN If just 1 out of 1 million people can do something, then it CAN BE DONE, it doesn't matter that the other 999,999 can't do it.
Everyone can see the chart, but only a few can actually read it.
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