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Just A Reminder...

Dear All,

I personally urges you to scrutinize any "super "trading system by providing fast rich method or all-in-one signal to realize your dream, before paying fee to them. As we all undertand, the way to fortune is a painstaking process, much due to your hard efforts and practice, do you think people now can produce any super machine better than human brain? Please do not fall victime of "impulsive buying", cool down yourself for some days first before giving your most precious asset: "Money".

Sunday, June 22, 2008

Trading Rules: Never Risk More Than 3%

One of the many trading rules I have in my trading plan is to NEVER risk more than 3% of my trading account. This is very important if you want to see your trading account to survive the long run in the dynamic forex market.

When I first trade the forex market, I don't want to understand this rules as I can never trade the forex market if I stick to it. Because with my startup capital of USD 120, and only risking trading account can only be allowed to risk 3 pips! This is impossible to do with any brokers.

Only after I trade for nearly 2 years and after some painful losses I slowly understand the importance of risking only 3% rule. Now if I only have USD 120 and to risk only 3%, and it is impossible to trade risking with that count, then don't trade or only trade with brokers who offer a 5 digit price quote system like the

However, I think it will be wise to start trading the forex market with USD 1,000 only to really get the good rewards of it. Or better still, trade the forex market with an initial startup capital of USD 10,000 = BND 14,000 (at the current average forex rate of USD to BND = 1.4). Taking only 3% risk for any given trade, with USD 1,000 you only allowed to risk not more than 30 pips per trade or when trading mini lot you are actually risking USD 30. With a startup capital of USD 10,000 and only risking 3% you only risk up to USD 300 per trade for a standard lot.

It must be understood here, the 3% risk calculation is not to calculate the number of pips to be risk, but it is to calculate the amount of your money to be risk for any given trade. So I have to repeat here like follows:

Capital Startup : USD 1000 x 3% (risk) = USD 30

Capital : USD 500 x 3% (risk) = USD 15

Capital : USD 10,000 x 3% (risk) = USD 300

If, you account balance becomes USD 800 from your startup capital of USD 1,000 you should;

Calculate : USD 800 x 3% (risk) = USD 24

So never risk more than 3% of you trading account when you want to trade the forex market. Risking more than 3% will eventually lead you quickly for a call margin scenario, which is for me quite very painful.

Happy trading guys ;)


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