All right. So we’re going back. So today we’re going to be looking into risk management for you as a Forex trader. Okay. This is the only risk management video you need to see as a Forex trader. You know Warren Buffet says that risk is doing what you have no clue about. So one of the things you can control as a Forex trader is how much you are willing to risk in every trade you place.
Okay And that is why you need to do your, your risk very carefully. I mean, I trade different strategies by now. You guys know that. There are some trade that I open. I don’t use a stop loss. And of course there are some trade stuff. I use a stop loss, so their is a question that, should I use stop loss, like sugar value, stop loss or whatever, how many, blah, blah, blah, blah.
It depends on you. It depends on your strategy. Depends on how much you have in your account. If you offer $20, $100, $500 in your account, my friend, you better manage that account. of course there are different videos online about our many percentage of your account you, you should risk, so on and so forth. Well, my recommendation is make sure you’re doing 1.5% of your account on every single trade.
What that means is that it’s not, there are instances whereby you lose trade. I mean, they, for example, this morning, Euro USD play pranks on us some of the traders. Of course the trade were lost. now when you look at did very well, it’s one of those days, it’s one of those things you have to deal with in forex. That is why you the look at how many percentage of my fund of my account, am I willing to risk.
Then also take us to position sizing, and his lot size, what is the type of accounts you are on it And of course what I teach my students, my VIP students is okay. Every hundred dollars you have in your account, you can trade 0.01 lot size 0.01 lot size that means you are working with, leverage of let’s say 1 to 200 or 1 to 100 if you’re using FX choice.
So when you look at that, to every trade, let’s say for example, you have $100 in your account. Don’t risk more than 1 to 2% of that account. I think I said this last week. So 1% of $100 will be $1. Why you are now chasing $100. It’s not, it’s not, it doesn’t work like that. So you have to look at your risk to reward ratio.
So you are in business. If you will risk $1 to make $2, if you cool risk $10 to make $20. If you put risk $100 to make $200 so that is your risk to reward ratio. So you have to also look at this, this trade am about to place, are you comfortable with your trade If you’re not comfortable then don’t go ahead and place the trade. Don’t force the trade.
Don’t, you know, one of thing that affect trader is FOMO – Fear of missing out, Oh, if I don’t close close this trade right now, or no the market will be there tomorrow, the market will be there next year, the market will be there next day. my country next year,the market will be there next 10 years as long as the human species, you know, human race exist the market will always be there. So if you don’t trade today, you will trade tomorrow. But always make sure that you guide diligently your fund. Haven said that you can not control how much you make in forex.
It’s okay. You can’t control how much you make in forex for example, this morning, you know, I was working with my students and of course, hours testing, showing that a particular strategy that caught my, my past strategy I personally placed. Of course, that trade was, you know making money we have like two, three trades you know on, on, of course all of them are positive. I went to sleep. Now what I did was I put my stop loss because in case this trade goes against me, this is how much I’m willing to lose. And of course, that was open before I woke up.
You know what I’m talking about and of course I lost that particular trade. Yes, that is one of the days where you, I mean, you don’t win all the time. I said it in life. You win some, you lose some, but what makes you progress on continuous live It is your winning must be greater that your loss. Okay So as forex trader you have to also have that psychology, how to handle your loss.
Okay If you place a trade and you can go to sleep. If you place a trade, you can go out. If you place a trade that your blood pressure is always up it means that you are over leveraging. It means that you are not trading the right lot size . Right Lot size for your account. So let’s say for example, you have a hundred dollars in your account. Then as like trading timeframe, like 15 minutes, five minutes, one hour day, you can be trading. Let me share my screen. for example, you have $100 in your account. Okay for every $100 you can trade
0.01 lot size. So that’s assume you trade, you are risking 20 pips. So if you are risking 20 pips and this trade 20 pips would be like twenty cent. Okay. Will be like a 20. Yeah. Like 20 cents. So of course you would discover that if you miss all, you lose this on this trade. You will not cry because you are only risking this out on red dollars.
If, if you are risking 1% of the dollars that is still like almost, $1, okay That is like $1 that you are listed from this account. So your risk to reward ratio. If you are risking $1 pursue , $1, $2, $3 there-about of course, you know, you’re in profit, but don’t be risking – you are not risking $10 and the profit you are making from your trade is $1. Then this is the bad risk to reward ratio.
This is a bad money management. So if to every $100 you are trading 0.01. Then if you will now have, let say $500 in your account, okay. and you are trading lower time frame. Okay Like 15 minute chart or one hour chart. Then this one here I would recommend you are 0.05. So don’t have $500 in your account and be placing a trade 1.0, lot size that is wrong.
Don’t have $500 in your account and you are trading. I don’t care. The kind of leverage you’re using. You’re not pleasing the trade for like a 10 lot size ofcourse it will not even allow you. Okay. So this $500 and you are trading lower timeframe for 15 minutes, one hour, you are using like 0.05. Now, if you have a $1,000 in your account, so what would be your lot size that you’ll be trading.
The position you will be trading right here will be 0.1. That is if you are, you know trading lower time-frame for like 15 minutes. One hour then have for me, is that if you have $10,000, this is when you can now say, okay, yeah, let me go stand that lot size then you are now trading 1.00. Okay So this is where you start making that big money in forex. However, at start don’t focus on the dollar volume focus on the pips.
That’s how you make money as forex trade. So if you are able to make 20 pips in this place as a profit, you are able to make 20 pips as profit. Are you able to make 20 pips in this place as your profit, you discover that the more money you have in your account, the more buying and selling power you have as a trader. And of course the more you’ll be able to make because when you get to this place, one lot size will cost like $10.
So it imagine if you make 20 pips. That is $200. Over here your 1pip will be like $1. Okay so your 20pips here will be $20. So on and so forth. Now, if you are now in swing trader, okay. If you’re a swing trader and you have $100 in your account don’t just go there. Even if you have $500 in your account don’t go there.
Now, if you have $1,000 in your account, now, remember as a swing trader, you are dealing with higher timeframe. You are dealing with maybe like a four hours or daily charts, okay. Or weekly chart. So if you are dealing with, you know, this timeframe, you know, definitely that yo risk would be, higher than when you are dealing with a smaller timeframe. So, if you are trading on four hours, daily or weekly, and you have $1,000, I would not recommend you trade 0.1.
In this case, you will be trading 0.01. Okay So with all this, there are a calculators online, or I don’t use all of that. If you can follow what I just stated in this video it will help you a lot. So $1,000 that you can trade 0.01. If you now have $10,000 in your account, and you are a swing trader you can trade 0.1 provided, you are working with leverage of 100 to 200. Cool. Okay.
I hope you are able to get this nugget on there, apply it to your trading. Make sure that you control what you risk. Now, when does it want to risk You imagine you place a trade., okay You place a trade. And of course it started going in your favor and its positive. It is going in your favor. This is where you put your stop loss, how much you are willing to risk.
Now, all of a sudden these trade can just go against you. Now, if it’s caught off this trade, these stop loss that you have already set, these are what you lost in that trade. The trade continues on. Of course, big profits. Yeah, absolutely. You make that money, but you don’t have control over how much you make, but you have control over how much you are willing to risk. I hope this makes sense to you.