RISK PER TRADE in Commodity/Share/Currency Markets
A most important yet simple thought process that a trader can start with is learning how to determine how much equity to put into any one trade or position called risk per trade. How much to risk per trade is a concept that many novice traders fail to realize until it is way too late. They end up learning the exact wiring instructions on a regular basis to their brokerage account; the real hard cases end up remembering those instructions by heart. Once you learn and have the confidence to trade a system like technical analysis software which will help for best buy sell signal entries and exits or follow a trading plan with a set of conditions and specific rules, you still need to have an effective method for risk controls. A best technical analysis software will help you to control the risk in trading in FOREX, MCX, NSE, NCDEX, MCX SX, COMEX markets.
I would start by considering how much risk per trade I should use by looking at my overall account size, then at the market’s volatility and liquidity conditions, and then at a certain percentage of the overall account on a percentage basis. Let me show you what I mean; and when we go over various stop types and methods later in the book, you will be able to better comprehend my meaning. If a person wanting to start a day trading account begins with USD10,000 (INR 650000) and uses a 10 percent risk factor per trade based on the overall beginning equity size, if the first five trades go bad, then he or she has lost 50 percent of the overall account. Therefore, it is imperative that traders learn different techniques to protect their trading equity. Investors also need to know the number of positions with which they should start in connection to the account size and the point at which they add on to their contract lot or position size.
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