Forex daily chart stop loss insurance definition Authority’ on Price Action Trading. In 2016, Nial won the Million Dollar Trader Competition. First off, Forex is highly leveraged, much more so than a stock trading account.
Forex trader or for any trader of highly-leveraged instruments. Forex should be thought of as a margin account, because that is essentially what it is. Nobody who understands these facts would put ALL their trading money in their trading account because it is simply not necessary. What you put in your trading account does not necessarily reflect all the income you have to trade and it does not reflect your overall net worth. Let’s say a guy in Singapore only has 10K to his name, that is all of his personal money, everything. Conversely, let’s say a guy in Australia has 2 million dollars free to trade with, he is obviously not going to put all of that in his trading account, because he doesn’t need to. He may put 20k in his account just to cover the margins of the position sizes he normally trades.
It just does not make any sense and it does not apply to Forex like it might to longer-term stock investors. What about drawing money to live on? We’d all like to turn 10k into 1 million compounded, but it never happens like this. That just shows you the unpredictability of your equity curve. The compounding effect is stupid because it assumes you won’t have these hiccups in your trading, that’s why I prefer to bank the profits as I make them. OK, so how much should I risk per trade Nial? Your risk per trade is a very important dollar figure that YOU need to come up with based on your personal circumstances which will encompass a variety of different variables.
We might have 1 million of trading money but will only have 50k in a Forex account. A lot of the margin in our account is used to hold a position and we don’t have a lot of extra money just sitting in there for no reason. You need to determine how much YOU are comfortable with having at risk at any one time in the market, and only risk THAT dollar amount or less. Obviously, your personal trading abilities come into play in determining how much you’ll be comfortable with risking per trade. If you’re relatively new or have just begun trading live, you’ll probably need to risk less per trade than someone with 10 years live account trading experience.
As you improve and build your confidence you may feel more comfortable increasing your risk per trade a little bit. As you can see, how much you should risk per trade is a somewhat personal question that requires some thought, time and trading experience to properly answer. Money management is not easy, and anyone who tells you it is, is lying to you or doesn’t know what the hell they are talking about. This is just a really stupid way to try and manage your money, and it clearly leads to gambling and over-trading. Your risk per trade changes with skill, experience and confidence. It’s something you have to gauge.
I don’t sugar-coat anything, and trust me, there’s a lot of sugar-coated B. Remember, money management is no good without a high-probability trading method, and if you guys have been reading my blog for a while, you know I am a huge advocate of price action trading. Implementing a solid price action trading method with a sound MM plan is in my opinion, the quickest path to trading success. NO sugar-coating it, you still have to put the study and effort in, and it will take time for you to turn the recipe into a masterpiece.
If you’d like learn how I harness solid money management with a professional trading strategy to achieve results, checkout my price action trading course and members’ community. Thanks very much and I appreciate what you’re doing. We arrived at some of the same ideas, such as dollar value vs margin and environment. There’s a lot of good reasons not to over-trade and real ways to find out what that means to the person and how they get to that definition.