How Much Do You Risk Per Trade?

Well then by his figuring and the explanation he has given with the decreasing returns with increasing risk then all I would need to do is risk .00000001% and my returns will be off the chart. The opening example is just stupid as all he has done is grab a magical figure of 100 pips SL and drawn conclusions from that.

Hanover has said it a million times, MM will not make an unsuccessful trader successful by itself, it requires more. Money management may be key but taking a bigger risk on a higher probability setup will generate far greater potential than just trading 1%.

And back to the start comment, I do not agree with his maths. Under no circumstances have I ever found based on set figures, does lowering the exposure lead to higher returns.

Based on 1% of say $10000 on a 50/50 outcome the total is always going to bleed. No alteration of the risk amount changes that outcome. However higher returns, say 60/40 Win/Loss average, the higher the risk the greater the returns regardless of how you balance the wins and losses. The only difference between to the two is that over the top risk with a string of losses will lead to margin calls. On the other side of the coin, large risk on a win streak will lead to large gains.

Having a set % risk for each traded and risking less does not guarentee you making money. Unless you are over time averaging more winners than loosers you will bleed slowly. Risking large amounts more and more open the flood gates and could potentially leave you mortally wounded. Take care, do your homework and balance you MM on the strength of the setup among other things. You will know when something is not working out in the manner you have expected, take the loss and move onto the next one.

RT

Interesting video but am I missing something here? Assuming he's referring to 1 lot Eur/Usd, since when is $1000 (100pips@$10 per pip) 17% of $7000, isn't it 14.29%?

Sure you'd have to make 17% to get back to $7k but that's not really what he said.....

Currently risking 10% of capital (at one time total account not per trade)and looking for low pip numbers.

As my account grows to about 2K or more it will drop to <5% to about 2-4% and look for an increase in Pips to maitain my profit targets. At the moment my pip target is very low so I'm only looking for 5-10 trades a week to hit my profit target and spending all the rest of my time trying to fight my impulse to trade more often.

At 10K I will change my plan to 2% and bank the profits each month or two. I will no longer use a compounding stratergy beyound 10K (my psyc is already finding it hard to NOT TRADE and a compounding stratergy past here is sure to push me over the edge and back into a losing plan as I get Profit blind again and take risker trades).

IMO, about 5-8% per trade, if you have the edge of winning that is.

Basically you need to calculate the probability of your strategy:

Expectation = (%win * Reward) + (%lose * Risk)

%win: how many times you can win out of your total trade using your strategy
%lose: contrary to %win
Reward: How much you win for every trade (Target Profit)
Risk: How much you risk for every trade (Stop Loss)

for instance, %win = 60%, %lose = 40%, Reward: $100, Risk $50, then:
(60%*100 )+(40%*-50) = 60-20 = $40
so it is expected that using the strategy on average you would make $40 per trade, so let's you have made 100 trades, total profit would be around $4,000

Unfortunately, most beginner Forex traders start out with too little capital. They try to turn $1,000 into $100,000 by being extremely aggressive and risking a big chunk of their capital on their trades, and when the inevitable loser comes along their account take a huge hit. It's like taking two steps forward and three steps backwards every couple of days: frustrating and unsustainable in the long term.

Believe it or not, the best Forex money management strategy is to dial your risk per trade way down to between 2-4% of your capital. This is the best cutting edge Forex money management strategy that all the big banks and hedge funds apply for all their traders, and I highly recommend that you apply it as well. It's called the % Capital Strategy, and it provides the optimum growth of your trading account with almost zero risk of blowing up your trading account entirely.

An Example:

Here's how it works. If you're really conservative, go with 2%, and if you're really aggressive, go with 4%. Any higher or lower and you're literally throwing money away. For an account size of $10,000, using a conservative setting of 2%, your maximum risk per trade would be $200. That means that if you have a stop 20 pips away from your entry, then you're allowed to take a maximum of 1 full contract.

A key decision that you need to make early on is whether you want to re-invest your profits or not. Obviously, re-investing your profits will allow you to leverage the power of compounding returns, while withdrawing your profits will not. By re-investing your profits, you can literally double or even triple your profits in a year! If you decide to re-invest your profits, then you'll have to update your risk per trade allocation and your position sizes at regular intervals. I would recommend updating your position sizes every 5-10 trades, so that you're getting the best compound growth of your trading account.

It's important to remember that you're still going to need a proven, profitable Forex trading system to make a consistent Forex income. Even the best Forex money management strategy will not make a bad trading system profitable, but without a good Forex money management strategy it's impossible to make a lasting Forex income. Be sure to have both of these two essential Forex trading elements in place, and you can be sure of your Forex trading success!

I risk from 0.25% to 1% per trade, and no more than 1.5% for the whole account

all in 400:1 leverage??...maybe not...0.5%/1% for total of similar risk position...learn the ropes...make money later

I also stick with 2%-4% at max. You still should feel comfortable, even when you are on a loosing streak. No need to panic out.

(Learned by making the mistake to risk to much per trade. Maybe you need to do it, before you really can appreciate a good money management.)

First, I take 2.5% of my account and find that dollar amount (A $1000 account = $25 at risk per trade)
Then I will use $25 as my risk for all trades. This helps unlock the true potential of the Reward:Risk ratio.
Once my account grows a significant amount, then I will re-evaluate 2.5%.

By using a fixed dollar amount, I might be exposing myself to a larger drawdown, but my recovery will be much quicker.

http://i45.tinypic.com/ao3pub.jpg

I risk at most 1% per trade. Forex is a game of attrition, and you want to make sure you can get to the finish line, yet I see most people on this website have accounts that look like a roller coaster. As long as you maximize your reward while minimizing your risk, your account won't be at risk to blow up.

“I guess the short of it would be what % of capital should your average trade be? I understand theres so many variables that effect the answer to that question, but still am curious. I’m trading around 40k right now, and have only been trading live for a little over a month. Most of my trades have been under 10k, but maybe 30% have been a little over. With the larger trades I’ve noticed alot of the time I either have a pretty tight stop and end up getting stopped out, or I’ll end up exiting too early taking profits, but not having the stomach to wait for the trade to really start working.

aajtak

2%

Why not create a poll?

Good strategy mate. Very interesting indeed

2%, not more unless there's a damn good reason for risking more..

Between 2-2.5% for me. In my opinion; anyone that risks more than 5% on their average trade is just looking to blow out their account, let alone 10%.

0,2% per trade with a risk/profit = 1/3 = 0,6% profit per trade..... for daytrading.

I don't think it's interesting to discuss that. Every trader set their own risk that they can afford, which is none of our businesses.
Please tell me why do you want to know our choice? How would that make any differences?
Just curious, my friend

I also risk as low as 1% per trade. Risk management is the key to success along with a good R/R ratio

​Why do you have to risk the same every trade?
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​Surely it's much more efficient to change your risk every single trade based on the results of the previous trades. If you're winning, increase you risk to use the risk free capital and increase your profits.
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​If you're losing, lower your risk to protect your capital as obviously at the moment in time your trading the wrong strategy in the wrong market conditions.