In this article, we will continue talking about forex trading risk management. If you are still losing money and your deposit drastically decreases you have to analyze your trading statement. I won’t give you any magic formula how to become profitable, but I want you to pay attention to your past trades, and how important is to count forex trade size.
Please open a forex trading statement of your trading account and take a look at loss and profit areas.
First of all, let’s see losses.
You can copy your statement to excel for more comfortable for analysis. Let’s say you have a deposit of 5000 USD (use your amount).
And you see loses: -100, -250,
-80, -350, -250, -400
Now let’s count:
-100 / 5000 * 100 = -2%
-250/ 4900 * 100 = -5,1 %
-80 / 4650 * 100 = -1,7 %
If you see something like this you should take attention to the fact that your losses are widening, that means you don’t follow risk management rules or even don’t have them.
I want to notice that you can have a brilliant strategy, but keep in mind that there will always be days or even weeks during which you will generate losses, that’s normal. Only one thing can be done in this situation; it’s balanced risk and money management. You have to decide what percentage of risk you tolerate per trade. If you are a day trader, I recommend no more than 1%.
So before setting a forex trade, you have to know where you will exit if your trade goes against you. If you see a good opportunity to trade by your rules, but by you risk calculation you see that your trade size is too small, you don’t have to open a bigger trade. You have to wait for the market to offer you a better trading situation. If the market can’t give it you don’t need to do anything, just wait or look for other opportunities. One more thing is that you can count your risk and even follow it by setting a right size of your trades and set a stop loss, but don’t move your stop loss if the market goes against you. In this situation, you can expand your losses and keep losing your money. That’s not good. In my opinion, if you decide a place for your stop losses before you enter a trade; you need to follow it and accept the loss if your stop loss hits. It’s normal, just analyze this trade situation, what was done well and what was bad. Even if you keep all your rules, you will get stop losses; that’s normal.
First of all, you need to have trading rules; these rules will help you to find better setups and avoid trades where you don‘t see confirmation by your rules. In my opinion and experience, I save money even if I don‘t trade. If I Am not sure about a trade doing nothing usually pays off.
The main thing in this article is to calculate forex trade size to follow your risk tolerance. So if you have deposits of 5000, and you decide to risk 2% per trade, it is only 100$. That means if you see a good place where you would like to set stop losses you need to count the right position size for this 100$. Today, most platforms can count it automatically, or you can calculate it manually. So I want you to take attention, to this. If you can’t tolerate your risk per trade don’t trade. It will save you money and nerves. The primary goal is to control your risk and grow your capital, not losses.