Open MT4 it looks like there is a Sell setup as learned. Continue SELL entry, Volume 0.10 equals $ 1.00 per pip. A moment later the price went up. Floating - $ 5.00.
The heart is pounding. Then the price went up again, - $ 10.00… ..started sweating in the cold.
"Brother, the food is ready… .eat first it will be cold."
"Sweetheart, eat first, Abang is in the middle of this trade. I'll eat later. ”
Soon the price started to go down. From - $ 10.00 now too - $ 5.00 and then start profit, $ 2.00. Ok now can only eat. Continue to the dining table but in my head, I still think about the running position. The wife tried to talk while eating but one question was answered. Quickly finish the food and go straight to the computer.
Oops… .now - $ 20.00 anyway. Open some other Timeframes… .the entry is correct. How come 2% is floating, then the price goes up - $ 30.00. The heart is beginning to worry because it is more than the risk that should be taken. Remember the teacher's words to take care of MM. Reluctantly continue to cut loss to keep the risk.
Soon the price dropped again, began to feel sorry for the cut loss earlier. Worse when you see the price sliding down.
Ever experienced a situation like the one above? Why is this happening?
One of the reasons is because they do not know where the right place to place SL or cut loss. So the entry was made without making a calculation of the lot size that should be opened.
Traders must know how to calculate lot size based on the risk to be taken so that the risk is minimal.
Money management
2% means 2/100 x capital. If the capital is USD1000
2/100 x 1000 = USD20.00
Many people are confused when they say do not risk more than 2% per trade. What some traders understand is to open a 2% lot.
Actually, 2% risk per trade means if we get SL we lose 2% @ USD20.00 if we have a capital of $ 1000
For a lot, the size formula is as follows: -
Risk (USD) / SL distance (pip)
Eg the distance SL is 40, then the value per pip is
$ 20/40 pip = 50 cents / pip
If acc standard, lot size is 0.05
So the higher the value of SL, the smaller our lot size. But we still lose the same USD which is USD20 @ 2% of our capital is USD1000.
What is the% risk that should be? Quite subjective, depending on how much the trader is willing to lose.
But basically do not risk more than 2% per trade.
Trading is about probability, protect your capital.
