#535: What’s a Sensible Amount of Risk to Take per Trade

What’s a Sensible Amount of Risk to Take per Trade  Podcast: Signup For my Forex Masterclass Find out more about Blueberry Markets – Click Here Find out more about my Online Video Forex Course Book a Call with Andrew or one of his team now Click Here to Download my Lot Size Calculator #535: What’s a Sensible Amount of Risk to Take per Trade In this video: 00:26 – Preserving capital. 00:40 – Control your emotions. 01:31 – Have a low and known risk per trade. 02:20 – Most people suggest a 3-5% risk per trade. 03:40 – A +2% gain for the week. 04:38 – Attend my Masterclass and book a call with us. 04:57 –Trade through Blueberry Markets. What's the sensible amount of risk the issue should take for each trade that you place as a forex trader? Let's talk about that important subject and more right now. Hey there, traders! Andrew Mitchem here, the owner of the Forex Trading Coach video and podcast number 535. Preserving capital. Today I want to talk about risk preserving capital, keeping your drawdowns low. And it all comes back to how much should you place on a trade in order to be a successful trader. Control your emotions. You see, for me in trading, there's two things you have to control. One's up here, the head ones in his heart. You have to keep those emotions under control. And you can do that quite easily by controlling your risk, because the fear and the greed always come into the trading as self doubt. But then greed when it comes to making money. Risk management is absolutely crucial. And unfortunate, far too many people don't know that and they don't know how to control that and they don't know how to implement that practically on day by day basis into their trading. You see, I think there's a lot of people out there that just don't know how much risk they're placing on a trade that is place to trade. And they got I've got a 20 pip stop loss and I'm going to put one lot on it or 0.1 lots. Because that's just what they think they should do. That is not how you trade. Have a low and known risk per trade. For me, the best way of trading is to have a known and low risk on every single trade. So you go into a trade and it doesn't matter what the currency pair is or even what the market is. I've taken a trade on Corn this week, you know, and it doesn't matter where it's corn on a weekly chart or the EUR/USD on a four hour chart, it doesn't matter. Every single trade has the same risk. It's known and it's low. So you have to adjust your position. Size according to a stop loss needs to be in order to calculate that. And it's very easy. And I have a free lot size calculator that does all that for you. But by doing that it means that every single trade that I take has the same risk, and by doing that, I can control my emotions and I can control my drawdowns. Most people suggest a 3-5% risk per trade. Now, you have a search out there online, and you'll find that most people will tell you to risk somewhere between about a 3 to 5% risk per trade. I think that's utterly crazy. You know, you have, let's say four trades go wrong and you're instantly 20% down on your account. Now, you need a lot of good trades to go right to make that 20% up just to get to break even. Now, that in itself is not a good way to trade. For me personally, I risk half of 1% per trade. So my four trades go wrong. I'm now 2% down. When I'm trading on a prop firm, I risk half of that again. So I risk only 0.25% risk per trade. In other words, if four trades go wrong, I'm now 1% down. That is within the rules, the criteria of a prop firm. It means I can have multiple trades all go wrong in a row, which is incredibly unlikely to happen. But let's say it did before I get anywhere near the maximum drawdown at most prop firms, which is somewhere between so maybe 5% or 6%, that will never happen if you're trading such a low risk per trade. So it's really important that you preserve capital.

Episode Transcript

(00:00):
What's a sensible amount of risk thatyou should take for each trade that you
place as a forest trader. Let'stalk about that important subject and more.
Right now, Hey, the traderis Andrew Mitcham here, the owner of

(00:22):
the Forest Trading Coach with a videoand podcast number five hundred and thirty five.
Did I want to talk about risk, preserving capital, keeping your drawdnds
low? And it all comes backto how much should you place on a
trade in order to be a successfultrader. You see, for me,
in trading, there's two things youhave to control. One's up here your

(00:44):
head, one's in here your hearts. You have to keep those emotions under
control, and you can do thatquite easily by controlling your risk. Because
the fear and the greed always comeinto trading self doubt but then greed when
it comes to me making money.Risk management is absolutely crucial, and unfortunately,

(01:06):
far too many people don't know that, and they don't know how to
control that, and they don't knowhow to implement that practically on a day
by day basis into their trading.You see, I think there's a lot
of people out there that just don'tknow how much risk they're placing on a
trade there's place of trade, andthey go, oh, I've got a
twenty people stop loss and I'm goingto put one lot on it or zero
point one lots, because that's justwhat they think they should do. That

(01:29):
is not hanging trade. For me, the best way of trading is to
have a known and low risk onevery single trade. So you go into
a trade and it doesn't matter whatthe currency pair is or even what the
market is. I've taken a tradeon corn this week, you know,
and it doesn't matter where it's cornon a weekly chart or the eurous on

(01:49):
a four hour chart. It doesn'tmatter. Every single trade has the same
risk. It's known and it's low. So you have to adjust your positions
according to where your stop loss needsto be in order to calculate that.
And it's very easy, and Ihave a free lot sized calculator that does
all that for you. But bydoing that, it means that every single

(02:09):
trade that I take has the samerisk, and by doing that, I
can control my emotions and I cancontrol my drawdowns. Now you have a
search out there online and you'll findthat most people will tell you to risk
somewhere between about a three to fivepercent risk per trade. I think that's
utterly crazy. You know, youhave, let's say four trades go wrong

(02:34):
and you're instantly twenty percent down onyour account. Now you need a lot
of good trades to go right tomake that twenty percent up, just to
get to break even. Now,that in itself is not a good way
to trade for me personally, Irisk half of one percent per trade.
So my four trades go wrong,I'm now two percent down. When I'm

(02:54):
trading on a prop firm, Irisk half of that again, so I
risk only zero point two five percentrisk per trade. In other words,
if four trades go wrong and nowone percent down, that is within the
rules the criteria of a prop firm. It means I can have multiple trades
all go wrong in a row,which is incredibly unlikely to happen, but

(03:17):
let's say it did before I getanywhere near that. You know the maximum
draw down that most prop firms allow, which is somewhere between so maybe five
or six percent. That will neverhappen if you're trading such low risk per
trade. So it's really important thatyou preserve capital, you treat your trading
as a real business. Treat itseriously and you can do really well.

(03:38):
Now, just give you an examplethis week on my on my prop firm.
So I'm trading here two hours throughthe twelve hour charts on that prop
firm this week, come up twopercent so far, and we'll still go
a whole day to go, andI'm only risking zero point two five percent
a quarter of one percent risk pertrade. Now, if I end up

(03:59):
the week with someone like two percent, maybe slightly more, maybe slightly less,
you know, depending on how todaygoes. And I do that,
say four weeks in a row,I've passed that prop firm four into five
weeks because of compounding on my gains, I've now passed that ten percent challenge.
And that's how you can get throughand trade prop firms if that's the
route you want to go now.Of course, on my own personal account,

(04:23):
if I'm doing that at half percentrisk, you know, that suddenly
becomes a four percent gain so farfor this week. So it shows the
gains that can be made whilst stillkeeping you risk extremely low and preserving your
capital. So I hope that helpswith that situation. If you'd like to
know more and you haven't been onmy free one hour master class. I'll
put a link here below this videoand podcast so you can do that is

(04:46):
on demand, So just find atime that suits you, allow a banner
and jump onto that master class andit will give you a huge amount of
information and trading tips and information ofhow you can become successful. And if
you're out there looking for a reallygood broker, I can highly recommend Blueberry
Markets. They're based over in Australia. They offer the Empty four and the
Empty five platform, a huge numberof markets and various timeframe charts are obviously

(05:09):
built into the Empty five platform aswell, and if you're out there looking
for a good broke, I canhighly recommend them, and I'll put a
link to Blueberry Markets on this videoand podcast as well. So any questions
you have, any topics you'd likeme to discuss on future sessions, please
email me Andrew at the Froust TrainingCoach dot com. If you're on YouTube,

(05:30):
please like and subscribe and feel freeto share this video and I see
you this time next week. Byetoday,