Risk management in Forex

 Today seems like the perfect day to learn something new with ValidUS.  We're going to talk about risk management, risk per trade position sizing, and how much of a lot size you should use on your particular trading account?

 So we're talking about risk per trade. It's extremely important risk is everything when it comes to trading. It's not about how much money you can make; it's About keeping capital in your account and protecting the wealth you bring to the table.

How can we figure out what a good risk per trade is?

Well, if you have a $ 1,000 account right, you need to think a bit of these numbers going into it. Many people will look at a thousand dollar account, and they'll put something like one point: zero zero lot size position, right.  The problem is that if you're using a 1.00 lot on trading as a trading account size of like $ 1000, it only takes a couple of losing trades to impact your trading account seriously. In fact, you know a lot of times. People will do something as much as 10 % risk per trade. Here is the problem, trading technical analysis is not something that's perfect. It comes down to understanding technical analysis. 

What is technical analysis? 

Well. Technical analysis is the process of looking at charts and coming up with a trade thesis or prediction for where price may be headed next, based on historical movements. So technical analysis might give us some clues, but technical analysis is a game of probabilities at the end of the day. It's all about probabilities, and the thing is: if we're using a 1,000 dollar account and we're using 1.00 Lots, we don't give a lot of room for error, and the problem with this is that error comes no matter how good your strategy is. Even if you have a 70 % win rate or an 80 % win rate, or even a 90 % win rate, there's going to be series of lures losers that come along, and you need to be prepared for this. If you're risking 10 % per trade, let's say that you have four or five losers in a row which can happen. The thing is, a lot of people are looking for some strategy. They think you know that they're going to find a strategy that never loses five times in a row, and we can tell you that losing five times in a row is entirely possible and has happened to people multiple times in accounts.

It's not a problem to take losers; many people think they are newer to trading. You know the markets. They believe that they need to be winning all the time. That's not always the case. It's okay to have losses but taking a 10 % loss on your account. That's huge! This means that we're going to be using $ 100 on this account, and if we lose $ 100 five times well, suddenly the account is 50 % drawn down. It's 50 % lost in it because we have now 500 dollars in our account. Suddenly, our leverage has been drastically reduced.  The account size has been drastically reduced. We've lost 500 dollars in just five trades, and we are telling you from experience that five losing trades in a row can totally happen. Even if you have a 70 % win, it's not out of the question because, remember, technical analysis or trading, in general, doesn't even matter if you're using technical analysis could be fundamental, whatever you're trading. If you take trades in the market, you have a probability of winning; you don't guarantee to win. So if you don't guarantee to win, it's not out of the question that we see something like this five losing trades in a row. If you're risking 10 % on every single trade, whether it's your stop-loss or whether you have some dynamic exit, where you close out at 10 % downright, if you do this, and it happens five times in a row, suddenly your account is cut in half. This is tremendously dangerous to trade. Your account is like this because it means that suddenly you could be losing half your account, and here's the thing. How much per cent do we have to get back if we want to take five hundred dollars and break-even? It's not 50%. We may have lost 50% right on the way down, but to get back to our starting balance. What do we need? Five hundred to one thousand dollars equals plus 100 %. What we've just done is created a situation where, in order to get back to break-even, to get back to our starting point, we need to make a 100% profit. Some people church shoot for 20% per year Warren Buffett consistently around 19 to 20 %  per year for like 40- 50 years. That's a tremendous track record. That's remarkable growth over time. 

You have to take tremendous amounts of risk in which you might risk the account again because the problem is when we lose accounts really quickly because we're using big risk that can kill accounts really quickly because suddenly you don't have any energy right having money in Your account is like having gas in your car. If you want to get further, you need to have a lot of gas in your car at all times, you need. If you want to go on a long road trip, you can't just run out of gas in the first. You have to have gas ready, and you have to have gas prepared in trading. It's the same thing: we want to keep everything ready. This number right here is starting capital and protecting it. So the first thing I'm just asking you to do is to consider in your trading. Look at what you're doing, ask yourself. Am I risking too much per trade because? 

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