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Risks and Losses of a Forex Trading System

Risks and Losses of a Forex Trading System
by Steven Matrixin Finance

RISKS
Naturally, don't risk higher than 5% of your account balance on any other trade. This means that your acute Stop Loss on any one trade should not surpass 5 per cent of your total account balance. For an instance, if you have a $1000 account, 5 per cent of $1000 is $50. This means that your maximum stop loss should not exceed 50 pips believing you are trading one mini contract with a value of $1 per pip. I see new Forex traders every moment risking 20, 30, even 40 percent of their account on one trade. With that risk, and four losing trades in a row, you'll wipe out your account. You won't last long taking wild risks like that, and the psychological damage will be lifelong. So minimize risk. Use 5% as a maximum risk threshold. Personally, I risk not over 1-3% on any trade. If you have larger account, you should follow the same rule, no exceptions. Even if how good a trader you are, it's not unheard of to have 6 to 8 losers in a row. No one likes it, yet if you stick with a 1 to 3percent risk limit, see and also be psychologically prepare for it, it will roll off your back instead of breaking your spirit.

LOSSES
A lot of traders long for Van Helsing's cross to raise when this hellish beast shows it soul-stealing teeth: Losing trades! A new trader will often feel ashamed after acquiring a losing trade. He feels that he has made a mistake and beats himself up over it. Penance does worst in this life, so confess your trading fault, resolve to never commit sin, but do not torment yourself. Listen to the Truth: Losing trades are part of the game and are to be generally expected. Forgive yourself, and move on, but never give up. It is the trading journey that overall will be correct, not each individual step. So accept every misstep. Like a renter paying rent to keep his store open, losses are part of the cost of doing business as a trader.