Escon deOjo's Forex

Always keep in mind that some unexpected event like a natural disaster, war or sudden death of a political leader could throw the entire market into misunderstanding. If you are risking too much on each trade then at some time or another your funds will be wiped out. All systems have their highs and lows and if your risk is too high, your account balance won’t be able to recover from the downs.

On the other hand, if your leverage is too low, you will not make much money even from a profitable system. And if your stop loss is too near to your entry point, it’s going to be caused too shortly. So risk must be optimized for your system. It is dependent on drawdown and average profit or loss per trade, but a good rough rule is to chance between 1 percent and 5% of your funds on each trade. Generally, the more cash a trader has in their account, the more careful they’re with it. Some traders consider that having a set risk per trade is too rigid and the risk should rely on the strength of a signal. What you want to avoid is varying the danger depending on intuition, or depending on the result that you had from the last trade.