Why you should risk only 1% of your trading account. If you are looking for the best trading advice, you already have it. Believe it or not, risking only 1% of your total investment and making sure not to cross this limit is an amazing way to solve all your problems in the currency trading business.
This is pretty simple advice to follow. Let’s show you an example. If you have $100 in your account, taking only 1% risk means you are willing to lose only $1. That means you will still have $99 in your hand which is not much of a difference. So, if you lose the trade, it will not make be a big loss. Now, it is pretty interesting to think that to many investors, this 1% of the risk is not that of a big deal. But remember, to most experienced traders, it is a very big deal.
Famous 1% rule
Do you know why you should follow this famous 1% rule in trading? It is because when you are trading, you will have to think about the future as well. Trading is a lengthy game where investors are seeking their profits in the long run. So, if you lose all your money today, what are you going to trade with the next day? It is concerning, right? After all, you are not here to lose your money, you are here to make money. But it is only natural that you will be making losses at times. But your losses should be small for you to have some investment in hand with which you can invest later. For this reason, you should get familiar with rules to follow your rule of 1% trading risk management.
Why only 1%?
Many of you may ask why we are saying to risk only 1% and why not more or less than it. By now, many of you have already understood that the lower the risk remains in a trade, the lower your chances of losing money. Now, if you want your career as a trading investor to grow, you will need to ensure that you have some money in hand. Otherwise, you will have a rough time looking for money or even clearing your debts.
We know that many of you are here for some more cash. You are here because you want more. But that doesn’t you will forget about what you already have. You first need to make sure that you have a promising amount of capital in your hand for you to make another deal. Going over a 1% risk could be a luxury for many investors at Saxo as it may add up to quite a lot of money.
But many of you may ask, why not go below the 1% risk limit. Well, if you get a good opportunity with less than 1% of the risk, we have no issues with it. However, it is pretty tough to lock big profits with a low-risk percentage. Even taking a 1% risk is often hard for many investors to ensure their monthly expenditure. So, try to trade with 1-2% risk so that you can manage to make a decent amount of money from the good trade setups. Remember, if you get scared because of the risk factor, you will fail as a full-time trader. You have to develop courage which will allow you to trade with decent risk. To do so, you have to learn the technical and fundamental details from scratch.
If you are into short-term trading, then it is a must for you to go for a short risk limit as these sorts of trading are often combined with the higher risk level. That’s why, to make sure that your investment is safe and sound for the next time you trade, you should take only a 1% risk of your whole trading account.