Risk and Your Forex Trading Style

The most valuable part of any style of investing, is being aware of what level of risk you are comfortable with. Without a good knowledge of this, the chances of you loosing everything are very high. Each type of Forex trade carries its own risk parameters and these will closely relate to your risk tolerance. Then there is your trading approach, conservative, moderate, and aggressive.

 When you first come to Forex trading you may decide to trade a day chart. The pip movement over a day can be many of pips, so when you protect your position you have to assess what your drawdown parameters are. If your money management is set at a 3% funds exposure, you will find problems on day charts unless your account is substantial.

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

 Yes, we all want increase our wealth from out trades, but risking ones account to wide stop positions and vast draw-downs is going to wipe out your account and trading career very quickly.

 A practical risk level is 3% or $300 on a $10,000 account.  Switch 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, determines a 100 pip stop position, then you are not risking 3% but 30%! Three reversed trades and your account has gone!

 An aggressive trader is prepared to take riskier trades that a conservative trader. They will expose larger amounts of 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 ’all risk’ trader.

 So where do you consider your trading style to be? Are you a highly controlled trader with correct money management and risk rates, or a trader that will take exaggerated risks for big gains? If you are the latter, you will not be trading for long, that’s a guarantee.

 If any of this leaves you a bit bewildered, you need to gain some knowledge, so begin by getting 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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