is the risk control is so important ??

zedanzz

Junior member
14 2
is the risk control is very important ??

we always warn the novices not to risk too much , and you will read this in every article you read and lestin to it from every trader you meet , but as a forex trader you shoudn't go on before you ask very important question ?! WHY ??

why shouldn't i risk too mush ! specially when iam in front of a very good trade which i have a very high probabilty in my favor , also specialy if you had losing streak before this trade and you are about to take you money back ! shouldn't I double my risk ?! how !!

i will not talk about the despline and the plan which must be followed because ofcourse you heard about them and you will read the same words in every article but i will tell you why you shouldn't increase your risk .

first i want to tell you that only big loss will hurt you , big loss can push you in the dark area and the lack of clear vision which will cause you to lose your confedence which is a very important element in trading .

to save your money from this problem you have the key ! never change your risk percentage , i will tell you why and how here ?!

how ?

by remembering one of the most important rules in trading which is { every thing can happen }
this is true ! you can not know what is going to happen and more important you don't need to know in order to make money , all you can do and you should is to know what is happening in front of you and you go with it , don't expect because you will lose . so always remember this { you just need to defend your money }
you must know that being successful trader means to survive as long as you can , the successful trader is not the one who always win ! he is the one who are able to continue after losing a trade ! .

why :

i will give you an example here :

let's assume that we have tow traders { A } & { B }

and i gave them the same amount of money 100 $ , and with the trader A i told him not to put on any trade with more than 2 % of the capital i gave to him .
the trader B refused this 2 % , he decided to risk 10 % of the money .

they put on the same trades , after 10 trades which were the first six trades were losing trades .

trader A :

he put on 10 trades , with the first 6 trades are losing trades and the next 4 are succssful trades . 6 x 2 % = 12 % > 12 $
4 x 2 % = 8 % > 8 $
tottal loss is > 4 $ only .


let's see trader B .. he put on the same trades but with more risk percentage .

6 x 10 = 60 $

4 x 10 = 40 $

tottal loss 20 $ which is 20 % of his capital in just 10 trades !!

what is important here is , we may take loss in the begining and this is not the problem , the problem is to never lose our money so fast in order to take the chance to get your money back again . if you blew up your account so fast you will put your self in the dark area and you may not be able to come back again !
never try to beat the market , don't try to fight back , market is unbeatable , all you can do is to defend your money , try to save it as long as you can , and you will find your money increases with the time , in the example imagine trader A who lost just 4 % of his money ! he will never give up and trader B is trying to get his money back from the market which means that he started a war he can't win .
trader A is in a comfort zone ! trader B is in the lack of pain and stress , he let his emotions enter the game , and you shouldnt let this happen .

so what ever happens never risk more than what your plan gives you to risk , don't expect the market to do something even if the odds are high and in your favour .

try to survive as long as you can and success will follow .

#rules_of_successful_trading .
 
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smokealarm

Junior member
18 1
yes obviously risk control is important for all of us who are trading you cant allow your money got wasted i think ... and there are several ways to stop this ... you can easily get that on investopedia
 

NVP

Legendary member
37,285 1,936
don't risk a penny in trading until you have a lot of experience - otherwise I can give you an address to send your money to ...............cut out the broker middle men
 
M

member275544

0 0
what gets me is that the person giving out the advice, can't even do his own maths and clearly does not understand percentages
One day perhaps he'll realise that 6 losing trades risking 2% each time is not a loss of 12%
 

tomorton

Legendary member
7,725 1,098
Absolutely right. And a 60% win rate does not mean that after 4 losing trades the next 6 must be winners.
 

NVP

Legendary member
37,285 1,936
don't spoil the fun toooo early guys ...........jees............let the rope extend and extend first
 

NVP

Legendary member
37,285 1,936
yes obviously risk control is important for all of us who are trading you cant allow your money got wasted i think ... and there are several ways to stop this ... you can easily get that on investopedia
investopedia ............full of knowledge but no answers to the important questions posed on these trading forums sadly.......:cool:
 

zedanzz

Junior member
14 2
what gets me is that the person giving out the advice, can't even do his own maths and clearly does not understand percentages
One day perhaps he'll realise that 6 losing trades risking 2% each time is not a loss of 12%
i a gree with you that's why you shouldn't ever get an advice from anybody , set a plan and go ahead , and you are right tow about the percentage , but the example was to make it clear not more , and also to let people see the fact that the risk control is very important in trading , igore it and your money will be finished one day .
 

zedanzz

Junior member
14 2
Absolutely right. And a 60% win rate does not mean that after 4 losing trades the next 6 must be winners.
i don't know what you mean , but you are right that no one can expect what will happen next all we can do is to manage our risk and the example was just to let people know the impportance of the risk management , what i meant that you can take losses in row , may be they will be the first 5 or 6 or even 7 out of the 10 trades , by cutting your losses short and letting your profit run you can survive .
 

zedanzz

Junior member
14 2
Thanks zedanzz, please give us some more percentage calculations.

tomorton , you are welcome , look if you want to understand the whole thing very well you can study the chapter 25 in al brooks's second book ( trading ranges ) which is talking about the mathmatics of trading . you will find it very helpful to understand how to manage your risk and how the probability of success and how it deals with the reward ratio .. you will find it very useful iam sure .

thank you
 

Arashimuro

Member
86 7
Risk control is a really important thing on forex, you can't risk too much and any risk has to be justifiable, afterall, you need to know why you're doing it and what you want as a result of an action, because you risk not only your money, but also your nerves, and oftentimes a part of the family budget.
 
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