# How to Calculate Risk on Forex

#### CarlosNorb

##### Trader
On the financial markets risk is money that can be lost, that means what percentage of the deposit you can afford to lose per trade. When trading, risks are inevitable, and the best thing we can do is to learn how to manage them.

Determine your risk
Risk is calculated as a percentage of the total amount of the deposit and depends on the trading style. So, determine your position size and set a risk limit you will risk on each trade. As a rule, it is recommended to risk of no more than 1-2% per trade at conservative trading. At moderate trading, it is allowed to risk 5%, at aggressive trading – 10%. It is usually used to upgrade a small deposit. A limit is set by placing Stop Loss when opening any trade. I would recommend risking no more than 2%-4% of the deposit in each transaction.

Let’s say you have \$1,000. If you risk 1% of your account on the trade, you could risk \$10 per trade.

\$1,000 x 1% (or 0.01) = \$10

Find your Stop
As you know, Stop Loss is set to limit the possible losses if the market moves against the position. Traders can use key support and resistance levels to place Stop Loss. Count the number of pips from your open price to your stop order.

Determine a lot
Here it is necessary to take into account two previous values: the risk percentage and the number of pips to your Stop Loss. Divide the dollar amount risked and amount risked by Stop Loss to find the value per pip.

\$10/20 pips = \$0.5/pip

For example, there is a deposit of \$1,000, the risk is 1% of the deposit amount, and Stop Loss is 20 points from the entry point. Hence the cost of one pip will be \$10/20 points = \$0,5 (50 cents). So, it is recommended to open positions of no more than 0.05 lot, since the value of 1 point is 10 dollars for the 1 standard lot.

This calculation refers to pairs, in which the dollar is in the second place, i.e. EUR/USD, GBP/USD, AUD/USD etc.

But you can make the process of calculation easier. In order not to calculate manually, you can use the Forex calculator. Many brokers offer traders such calculators which can be found on the website. The calculator calculates the potential profit and loss according to the given parameters: currency pair, currency of deposit, volume, Stop Loss and Take Profit.

#### 37riched

##### Active Trader
Thanks to providing that info here, I think lot of people will be really lucky to find something like that in the whole forum being a newbie completely and just starting their trades on the forex accounts and so on clearly. I do not see anything like that for long time.

#### Adam Jackson

##### Trader
Due to uncertain market and risky behaviors, of course every foreign currency exchange trader can try to develop proper protection against unwanted and sudden price fluctuations of currency pairs to protect his wealth position and earn some definite profit. Earning money will be easier only when a trader can think of placing orders in safe zone. And he can also take help from stop loss, trail stop or other pending orders.

#### Dictorsto

##### Trader
This is great article as it practically shows steps for risk calculation. It is one of the major things for every trader to learn in order to keep both capital and profits safe from potential losses. Golden rule is never to put all your money in one deal. In addition, always use SL order

#### Ary Barroso

##### Active Trader
Thanks for your contribution! Really outstanding; basically risk management is a very important issue to exist here in a long run! In my trading, I never and ever take more than 2% risk in my per trade!

#### Ann

##### Active Trader
What is the profitability of a trader at a risk of 2% per trade? Maybe it will be lower than the deposit in the bank? 2% for a trade means that you expect 50 losses in a row. Why do you need so much money to the account? Put the sum of ten losses. And if you lose 10 trades, then consider whether to continue. This is not trading, lose 10 trades in a row. This is a demo you need.

#### Ary Barroso

##### Active Trader
What is the profitability of a trader at a risk of 2% per trade? Maybe it will be lower than the deposit in the bank? 2% for a trade means that you expect 50 losses in a row. Why do you need so much money to the account? Put the sum of ten losses. And if you lose 10 trades, then consider whether to continue. This is not trading, lose 10 trades in a row. This is a demo you need.

According to the market condition; you can expect even more than 10% profit ratio with only 2% risk! 2% risk doesn’t mean only 2% profit!

#### Onanak

##### Trader
Ann, I think that you have missed important lesson called risk and capital management. I think that good advice for you would be to go back to demo account and try to go one again through this lesson. If you want to become good trader you would need to manage your capital properly

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