Risk per trade in money management forex can be interpreted in general as how much of the capital you are ready to use in every forex trading transaction (buy / sell). The amount of risk per trade must be arranged in such a way that when your transaction loss you remain calm, and can move on directly to the next transaction.
There are two ways to determine the ideal risk per trade:
In this way, risk per trade is calculated by a percentage of your overall capital. Examples like this:
Your trading capital is $ 100. Percentage risk per trade you use 5%. Then for every time a buy or sell transaction, you use 5% of the overall capital as margin i.e. :
$ 100 x 5% = $ 5
If you loss, then the loss you receive is 5% of the total capital, is $ 5.
In this way, you use risk per trade based on how much capital you are ready to use to make one buy or sell transaction. Examples might be something like this:
Your overall capital is $ 1000. for every time the transaction, the risk loss you are willing to bear is $ 50. The $ 50 amount is the calculation in the type of capital fix.
How to use risk per trade in money management can’t be separated from the name of position sizing. Please refer to the position sizing in the article below:
The two ways of calculating risk per trade above have their respective deficiencies and advantages. If you use a fixed percentage then it will not take too much in losing, but it will take longer to recover.
If you use a fixed capital, then the total number of lost losses will be large enough, but it will be faster for recovery.
As a note, this calculation also will not be separated from the ratio of risk – reward from trading system you use.
Determining how the risk per trade that will use will facilitate you later in making money management trading plan that is suitable for each trader. Please refer to other articles for understanding money management in forex trading you more complete.