How to Trade Safely?
- Thread starter Rambo35
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Always assume risks 
For example, for a $ 5,000 account, do not trade more than $ 2,500 in a position. What means 0.25 standard lots. The risk in that case is 0.5% - 1% per transaction. It doesn't matter if the stop loss is set to 30 or 100 pips. The dynamics depends on the underlying asset, some pairs represent a higher volatility, others lower. What matters is: the risk you assume must be established and fixed in advance. Risk formula is the following: SL * Leverage / 100% if SL is at 20 pips, (20 * 5) / 100% As an example, We have two accounts, and both start at $ 10,000. We have a transaction of $ 500,000 (5 standard lots). In the first case we have a leverage 1:50, in the second case 1:5. 100 pips for each situation, as a stop loss order. In the first case we have a loss of 5000, in the second 500. In the first case we have an extremely difficult situation to manage. In the first case we have a loss of 50% of the initial value of the account, for only one transaction. In the second case, the loss is only 5%.
For example, for a $ 5,000 account, do not trade more than $ 2,500 in a position. What means 0.25 standard lots. The risk in that case is 0.5% - 1% per transaction. It doesn't matter if the stop loss is set to 30 or 100 pips. The dynamics depends on the underlying asset, some pairs represent a higher volatility, others lower. What matters is: the risk you assume must be established and fixed in advance. Risk formula is the following: SL * Leverage / 100% if SL is at 20 pips, (20 * 5) / 100% As an example, We have two accounts, and both start at $ 10,000. We have a transaction of $ 500,000 (5 standard lots). In the first case we have a leverage 1:50, in the second case 1:5. 100 pips for each situation, as a stop loss order. In the first case we have a loss of 5000, in the second 500. In the first case we have an extremely difficult situation to manage. In the first case we have a loss of 50% of the initial value of the account, for only one transaction. In the second case, the loss is only 5%.Brokers can offer you more money, ie more money than the initial deposit. The money involved in the transaction is the risky money. Why do we use leverage? We use leverage to increase our potential profit, but the potential risk will also increase. We assume a leverage of 1: 100. That is, for the $ 1,000 we have in our account, we will be able to trade a trading lot in the amount of $ 100,000. What is happening? If the market goes in our favor, at 100 pips win on 1 standard lot of 100,000 we will have a profit of $ 1000. Unfortunately, this is not always the case. For every dollar of contract we make 1 cent profit 100,000 * 1 cent = $ 1000. That is 1%. If we have a loss of 100 pips, the value of the account decreases by $ 1000, so the account reaches 0. We will not be able to trade until we deposit. It is a situation to be avoided. This happens when we do not assume risks )
Always assume risks
Sorry, but your formula is quite off. For everyone who is interested in learning to size their trades based on the risk, here is a good explanation:
https://www.earnforex.com/blog/position-sizing-rules/#risk-based-position-sizing
Agreed! Balance between the two is a must. Both knowledge and risk management are essential.
To trade safely many traders use Stop loss strategy to minimize their losses and save their capital investment.
Evey trade want to play safe, It can only be done by trading with less volume so that you don't hit huge loss and moreover observing other good traders and learning strategies and by observing the market.
I have traded with both insta and fxcm, what I can say is insta has very high spreads, fxcm is okay, but just recently, I noticed they have been banned in the US!
I just think traders need to know that demo is very essential for anything that involves trading.
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