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Trade
How to calculate the risk per trade
Financial risk risk is commonly understood as the money that can be lost. As a rule, the risk is limited, that is limited to a certain time period or conditions. Today we take a closer look at the question, what is the risk of the transaction on Forex?
Not rare on various forums to read what was taken as the risk per trade to 3% or a risk for a week is 20%. To understand this issue, consider the examples should demonstrate, what actually could lose people in the process of working on the market.
The risk of the transaction. Let the trader has a Deposit of $1000. When selecting a money management (MM), my husband decided that he would not risk more than 3% of the total capital, which means limiting losses at $30.
If the invoice amount will not change over time, and the magnitude of the loss in one operation the money will change as well. For example, over time, the capital account may be increased to $1200, and this means that one position will account for 3% of new amounts of money, which is $36. Similar would be the situation if a Deposit rather decrease due to a failed trade.
Now how to calculate the risk per trade how to choose a lot. The conditions remains the same, that is, the Deposit is $1,000, a 3% risk in the Forex deal, but now we need to know something else. To understand how a lot to open a position, you first have to determine the amount of stop-loss in points. Let me remind you that 1 lot = 100,000 units of the base currency.
It turns out that when you work with a lot of 0.1, each point is traversed market price is estimated at $1. For example, if you open a buy position of 0.1 lot, and the market will take place on 10 points, we earn $10, not taking into account the payment of the spread.
If no Stop Loss the trader the transaction is expected value of 20 points and lose for the surgery he has a maximum of $30 (3% of $1000): 30/20=1,5. This means that the speculator can afford to lose $1.5 per one item, that would not violate his own rules of trade. Such a step corresponds to a lot of 0.15. Even if the market moves against the trader and will reach its Stop Loss currency transactions (20 points), the loss with a lot of 0.15 is equal to $30.
Limiting the risk of time
Risk for a week. Not infrequently, currency speculators prefer to limit the risks for a week or a month, that would not lose all of your Deposit, being uncomfortable for their trading system conditions. For example, the trader can keep the risk per trade to 3% of the Deposit, but to enter another filter, which limits the loss for a week, for example, it will be 20%.
It turns out that in the course of trade when positions are closed with profit, loss and drawdown should not exceed 20%. Additionally get 7 losses in a row for 3% of every Deposit that would exceed the established acceptable amount of losses. Work can be that 4 days of trading were concluded, for example, about 30 trades, but at some point, their total score reached 20% of capital.
Such protection can be useful when the person notes in his work good and bad times. Makes no sense to continue to lose money, if it is obvious that the current state of the market does not correspond to the working conditions of the system that the person uses.
If I had met the expression "risk on a trade, keep in mind that we are talking about risk per trade. There is still the limitation of the loss by the number of items, when a trader makes for himself the rule, for example, to complete the trade as soon as received the third negative in a row. In this case, the person ends up in that day job, and returns to the market the next day.
As you can see, there is nothing complicated about the calculations of risk. To explore this question fairly quickly, which will help to limit losses are not random, turning this process into a complete system.
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| Category: Forex | Added by: (06.11.2017)
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| Views: 320
| Rating: 0.0/0 |
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