More risk, more profit: is it true?

It's obvious that if trader wants to earn huge investment then he has to make bigger investments on Forex keeping in mind that loss is also a part of any trading business and can be quite big in this case. So, trader has to bear more risks if he wants to earn more profit.

The one's who think Forex is easy are either noobs or have no clue as to what currency trading is all about. The reality is that it is anything but easy..and as for the high risk, more profits - yes but the chances of incurring heavy loss goes up as you increase the risk..

If your system has a positive expectancy use up to the amount defined by the Kelly criterion http://en.wikipedia.org/wiki/Kelly_criterion

If your system has a negative expectancy then risk zero (Demo)

Simple :-)

BBCMirco

This is very untrue. Please not think like this, it will make you not best trader. There is always risk, no. If you thinking or wanting no risk, please get away from the trading. If you are the good trader you can make the more profit and minimize the risk, by making and having the smart trade set ups. Okay I hoping this helping you, no.

It is only if you risk more, you can gain more.

It's the same with most things in life, the risk is proportionate to the potential reward/loss.
Essentially, it's a matter of finding the highest level of risk with which you and your account are comfortable, and which also gives a suitable return.

Those saying the smallest risk has the highest reward have a point in that a higher risk is likely to relieve you of your balance sooner. But that said, this all depends on the system being traded.

Say for example you have a system with the following assumptions (BTW: if anyone does, please let me know!):
- Max 1 trade open at any time
- S/L & T/P at +/- 100 pips
- Wins 60% of trades

Depending on your attitude to risk you could tune your lot sizes such that every trade's exposure is 10% of your account balance, in theory this would leave your balance at around +10%.

But then we have to be mindful of the fact that we're in the real world, and even this perfect system's 6/10 winning trades might not all happen at once, for example you could have the following 30 trades:
| LOSS | LOSS | LOSS | LOSS | LOSS | LOSS | LOSS | LOSS | LOSS | LOSS | WIN | WIN | WIN | WIN | WIN | WIN | WIN | LOSS | WIN | LOSS | WIN | WIN | WIN | WIN | WIN | WIN | WIN | WIN | WIN | WIN |

The system would be performing as promised with 18/30 (or 6/10) wins.
However, had you allowed each trade 10% exposure to your account, you would have been wiped out after the first 10 trades.
This is an extreme example, but it shows that a competent system also needs suitable money management.
Had you allocated just 1% to each trade, you would see the following benefits:
A) You have time to spot any weaknesses in the system, after the initial 10 losses, perhaps you've spotted something it could do better.
B) You give your system much more chance to succeed, sure it might win the first 6, but much more likely it will need a longer timeframe to prove itself.

So many potentially good traders empty their accounts due to poor MM before they realize they were on to something!

Anyway, enough rambling from me

No. Not like this. You can gain more and not risk more if you waiting for best trade setup. Please, hope you understand. Ok now I start own journal and show you, no.

more risk and more profit
maybe people is like to hear more profit and leave the risk
high risk is almost the same as gambling, in my opinion the keys is how to decrease the risk on every position we made

Lets take a very simple but extreme example.

When you risk 1% of your account maximum. It is highly unlikely you will make 100% in a single month, but it is highly likely you will not bust your account.

When you risk 10-50% of your account, making over 100% profit in a single month is more than possible. But you are likely to blow your account sooner or later.

Conclusion, more you risk higher the chance of making bigger profits.

I have found that I can't stomach even half of the drawdown I thought I could.This changes a lot for me.
I can't get rich quickly from fx.Infact I have thought of quitting altogether. I can't imagine playing for 2-3% per month, with the capital I have its worthless. It will take me 'millennia' to make a good roll.

I like controlled risk and consistent profit

i think we should risk less to avoid burning accounts.... with less risk and stop loss we can filter bad trades.... the market is ever changing. those indicators does not predict future price movements. for example you open 10 trades even if you lose 6 times in a row with tight stop loss you'll still be able to trade and not have a stop out and if you're lucky you'll end up having like 4 profit trades running then use trailing stop to protect trades.... then just be happy to have small profits.... a cent makes up a dollar...

How about low risk high profits.

We need highly probable entries with R/R ratio more than 1:3 I guess

My point is, if you double your low risk you make double the profits. Mostly more risk equals more profit.

This question can be answered quite easily with an Excel spreadsheet.

There are some very wrong answers and attitudes here, then again the initial question is limited in clarity as well.....

the question does not define which risk is being referred to...

if the question refers to stake risk (lot size) then we all know that is linear stake $10 @ 3:1 = $30 or $20 @ 3:1 = 60$ risk is the same

if the risk referred is account risk ie: % of account staked per trade, then NO it does not mean more profits it means more account movement (not necessarily profitable movement) - account management is a long game not a quick bet, it is about capital preservation through potentially long draw downs via repeated losses - you have to think like an investor not a gambler, not a trader to succeed in account management. More account risked will reap more potential profits (see stake risk above) but too much and the fate of the account will be a swift nosedive

then there is the trade risk itself which I doubt the thread starter was referring to, aggressive entries reduce the odds and offer a bigger draw down, the successful trader will be looking for the right balance, and the risk can be altered depending on where you entry is placed. Gator refers to waiting for the "cheap seats" what he is doing is decreasing the entry risk and this will often increase the profitability of a single trade by increasing the trade odds.

so risk has many faces............

It's funny how a lot of traders talk about taking more risk, when the singular most important thing in this business is managing risk. The first step to becoming profitable is managing risk.. Next understand your system by knowing what works and what doesn't and when you know what works stick to it. hopefully you keeping a low risk profile will get you through the good and bad times profitably. And as for risk/reward ratio, the 1:3 risk/reward doesn't always work so keep calm, study hard, manage risk and emotion, and make money.
Remember Forex is about SURVIVING. What's the point in making money to spend then dying the next minute?