How much are you prepared to lose?

When I started trading Forex, I lost so much money and in fact I thought for some time that may be Forex trading is not for me. I realized later that my money management strategy was completely wrong.

Just like many Forex traders, I was focusing mainly on how much I was hoping to gain on any trade paying less attention on what I stand to lose in a particular trade. In other words I was not mentally and psychologically prepared for losses.

Consequently, I decided to know in advance where to place hard stops, calculate how much I would lose if the trade goes against me and be psychologically prepared for any eventuality. Since then I never feel so bad if any trade does not turn out to be a winner.

So how much are you willing to lose?

There are many strategies out there to trade the Forex market, but one that I find rewarding is to locate consolidation areas, pivot zones or support or resistance areas and place hard stops above or below such areas, but before I do that I MUST CALCULATE how much it would cost me if the trade hits my stop loss. If it is more that what I could bear, I simply let the trade go, I would NOT place a trade. Sometimes I use 20 pips, sometimes 30 but not more than 40 pips. Also I look for trades that would give me at least 3:1 win / loss ratio.

Again, be prepared for that loss, it helps. The market would always be there, there will be a better opportunity. Do not lose more than 2% of your account size on any trade. Good luck

i've been doing it as 2% of my trade size so far

i think i need to do some research on the average fluctuations in stock price to determine what constitutes an unusual drop in stock price before i settle on a specific %

ForexLion said:

There are many strategies out there to trade the Forex market, but one that I find rewarding is to locate consolidation areas, pivot zones or support or resistance areas and place hard stops above or below such areas, but before I do that I MUST CALCULATE how much it would cost me if the trade hits my stop loss. If it is more that what I could bear, I simply let the trade go, I would NOT place a trade.

Click to expand...

Hi ForexLion,
I think that is the way to go....
as a trader, one always has to check on his risk management on every single trade he places....

Apart from this, I don't understand why you need to calculate how much is going to cost you a trade that goes wrong...

Don't you position size?

I mean, if your SL is gonna be placed 50 pips away from your entry, for whatever reason you use to place them, and you want this 50 pips to be 1%, 2%.... of your account, simply position size for this to be like that..... so you don't calculate how much is gonna cost you a SL hit, but you give it the value you are "prepared to lose", so your desire risk, is controlled for every single trade, no matter how big or small your SL is....

sounds better and better to me dude....

The Main Rules of trading are Survival and Capital preservation....and that comes from Trading not to lose money rather than Trading to make money

(its a different mindset)

The rewards will come eventually but only if you are still around to reap them

N

and heres how much you must be prepared to lose.......even with good strategies....

http://www.trade2win.com/boards/for...-basic-ideas-strategies-1078.html#post1833814

NVP said:

sounds better and better to me dude....

The Main Rules of trading are Survival and Capital preservation....and that comes from Trading not to lose money rather than Trading to make money

(its a different mindset)

The rewards will come eventually but only if you are still around to reap them

N

Click to expand...

Good touch there too NVP