It’s time we addressed the elephant in the room…
Well, the most popular answer is to try to limit your risk to 2% per trade.
But even that might be a little high for newbie forex traders.
But don’t take it from me, take it from the stats.
Just take a quick look at this table that shows the difference between risking a 2% of your capital per trade compared to risking 10% percent.
It’s clear to see that there’s a huuuuuge difference between risking 2% vs risking 10% of your capital on just a single trade.
Just imagine you hit a losing streak and lose 15 trades in a row, risking 10% on each trade. If your starting balance was $20,000 then you would only be left with $4,575.
That’s over 85% of your account gone.
Boom. Just like that.
However, if you only risked 2% on each trade, you’d have only lost 30% of your total account and you would still have $13,903 in your pocket
I know, I know. You don’t even want to think about losing 15 trades in a row.
The truth is, the difference would still be significant even if you had only lost 5 trades in a row.
The point we are trying to make is that it’s crucial you set up your risk management rules in a way that even when you do hit a drawdown, you will still have enough $$$ to stay in the game.
Can you imagine losing 80% of your account balance?!!
You would have to make 400% profit of your remaining balance to just break even.
In the table below, we’ll look at a number of different examples that show how much you’d have to make to break even if you were to lose a certain % of your account balance.
The more you lose, the harder it gets to get back to your starting capital…
We can’t stress this enough when we say PROTECT. YOUR. ACCOUNT.
Only risk a small percentage of your account balance so that your world won’t come crushing down when you hit the losing streak!
You got this!