Risk and Your Forex Trading Style

The most valuable part of any type of investing, is being aware of what level of risk you are comfortable with. Without a good understanding of this, it will be way too easy for you to loose all your capital. Every Forex trading strategy carries its own risk parameters and these your choice will be defined by your risk tolerance. Then there is your personal approach to trading, conservative, moderate, and aggressive.

 Initially you may decide to trade a day chart. The bar movement over a day can be 100’s of pips, so when you select your stop-loss position you have to assess what your drawdown risks are. If your money management is set at a 3% funds exposure, you will get into problems on day charts unless your account is substantial.

 The 5M or 30M charts maybe more appropriate since the pip movement tends to be smaller, so your stop strategies can fall within your management range.

 Yes, we all want to make money from out trades, but exposing ones account to wide stop positions and excessive draw-downs is going to clean out your account and trading career in no time at all.

 A common risk level is 3% or $300 on a $10,000 account.  Change this to pips, 1 standard lot ($100,000) has a pip value of $10 so if you trade end of day and your stop loss positioning, whether count-back or support and resistance or any other, indicates a 100 pip stop position, then you are not risking 3% but 30%! Three wrong trades and your account has vanished!

 An aggressive trader is prepared to take riskier trades that a conservative trader. Their tendency is to expose bigger sums or money in riskier trades with the hope of grabbing bigger profits – often over extended trading time frames but they may still use the similar strategies for shorter times as well. Very much the ‘out in a blaze of glory’ trader.

 So where do you place yourself? Are you a highly controlled trader with good money management and risk rates, or a trader that will take over the top risks with all or nothing gains? If you are the latter, you won’t be around for long, that’s a guarantee.

 If any of this leaves you a bit uncertain, you need to learn more, so commence your Forex training with Top Dog Trading, you will learn an enormous amount and it will help you trade with safety to win pips not risk everything.

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