Why Not Risk More Than 2% of Trading Account?
- 1 "What do I need to do to get back to balance?"
Why not risk more than 2% of the trading account? Below we will make a comparison between 2% and 10% per trade. But that might even be a little high, especially if you're new to Forex or Options. Try to limit your risk to 2%.
Here is an important illustration that will show you the difference between risking a small percentage of your capital per trade compared to a larger percentage. You can see that there is a big difference between risking 2% of your account versus risking 10% of your account on a single trade!
|Trade||Account Total||2% risk||Trade||Account Total||10% risk|
|1||$ 20,000||$ 400||1||$ 20,000||$ 2000|
|2||$ 19,600||$ 392||2||$ 18,000||$ 1,800|
|3||$ 19,208||$ 384||3||$ 16,200||$ 1,620|
|4||$ 18,824||$ 376||4||$ 14,580||$ 1,458|
|5||$ 18,447||$ 369||5||$ 13,122||$ 1,312|
|6||$ 18,078||$ 362||6||$ 11,810||$ 1,181|
|7||$ 17,717||$ 354||7||$ 10,629||$ 1,063|
|8||$ 17,363||$ 347||8||$ 9,566||$ 957|
|9||$ 17,015||$ 340||9||$ 8,609||$ 861|
|10||$ 16,675||$ 333||10||$ 7,748||$ 775|
|11||$ 16,341||$ 327||11||$ 6,974||$ 697|
|12||$ 16,015||$ 320||12||$ 6,276||$ 628|
|13||$ 15,694||$ 314||13||$ 5,649||$ 565|
|14||$ 15,380||$ 308||14||$ 5,084||$ 508|
|15||$ 15,073||$ 301||15||$ 4,575||$ 458|
|16||$ 14,771||$ 295||16||$ 4,118||$ 412|
|17||$ 14,476||$ 290||17||$ 3,706||$ 371|
|18||$ 14,186||$ 284||18||$ 3,335||$ 334|
|19||$ 13,903||$ 278||19||$ 3,002||$ 300|
If you went through a losing streak and lost 19 negociações in a row, your account would have gone from $20.000 to just $3.002 if you risked 10% on every trade. You would have lost over 85% of your account!
If you only risked 2%, you would still have $13.903, which is only a 30% loss of your total account.
Of course, the last thing we want to do is lose 19 trades consecutive, but even if you only lose 5 consecutive trades, note the difference between risking 2% and 10%.
- If you risked 2%, you would still have $18,447.
- If you risked 10%, you would only have $13.122.
That's less than you would have if you lost all 19 trades and risked only 2% of your account!
The point of this illustration is that you must configure your rules for risk management so that when you have a period of bad business, you still have enough capital to stay in the game.
- Can you imagine losing 85% of your trading account. negociação?
- You would have to make 566% with what you have left to break even!
"What do I need to do to get back to balance?"
Here is a table that will illustrate what percentage you would have to make to break even if you lost a certain percentage of your account.
|Capital loss||% Required to return to breakeven|
- Strict regulation in various jurisdictions
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Up to 120%
- Segregated client funds
- Negative balance protection
- Member of the Financial Committee
- Powerful and easy-to-use trading platforms
- Good selection of trading instruments
- Various account types and funding options
- Negative balance protection
- Investor Compensation Fund
- tight margins
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- Regulation Broker With Good Reputation
- Copy Trading
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- Regulated and safe forex broker
- real ECN trading
- Better trading conditions for users (0,0 pips spread and commission)
- Regulated Broker
- Social Trading
- Friendly Interface
- Many Educational Materials
- Demo Account with $100.000
- Welcome Bonus
You can see that the more you lose, the harder it is to get back to your original account size. This is all the more reason for you to do everything you can to PROTECT your account.
So far, we hope you've realized that you should only risk a small percentage of your account per trade in order for you to survive your losses and also avoid a big loss to your account. Don't let your negotiations turn into gambling.
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