The most important part of any type of investing, is understanding your personal risk tolerance. Without a good comprehension of this, the chances of you loosing everything are very high. Every Forex trading strategy carries its own risk parameters and these your choice will be defined by your risk tolerance. Then there is your personal approach to trading, conservative, moderate, and aggressive.

 Initially you may decide to trade a day chart. The bar movement over a day can be 100’s of pips, so when you select your stop-loss position you have to assess what your drawdown parameters are. If your money management dictates a 3% funds exposure, you will get into problems on day charts unless your account is large.

 The 5M or 30M charts maybe more suitable since the pip variation tends to be less, so your stop strategies can fall within your management range.

 Yes, we all want good returns from out trades, but jeopardising ones account to large stop positions and excessive draw-downs is going to burn out your account and trading career in the blink of an eye.

 A common risk level is 3% or $300 on a $10,000 account.  Convert this to pips, 1 standard lot ($100,000) has a pip value of $10 so if you trade end of day and your stop loss establishment, whether count-back or support and resistance or any other, indicates a 100 pip stop position, then you are not risking 3% but 30%! Three reversed trades and your account has gone!

 An aggressive trader is open to taking riskier trades that a conservative trader. Their tendency is to expose larger amounts of money in riskier trades with the hope of achieving larger returns – often over extended trading time frames but they may still use the similar strategies for shorter times as well. Very much the ‘out in a blaze of glory’ trader.

 So where do you place yourself? Are you a level headed trader with good money management and risk rates, or a trader that will take exaggerated risks for big gains? If you are the latter, you will not be trading for long, that’s a guarantee.

 If any of this leaves you a bit uncertain, you need to learn more, so start your Forex training with Top Dog Trading, you will learn an enormous amount and it will help you trade with safety to win pips not risk everything.

 Never trade without having all of the facts! Click Here To Get Your FREE Five Day Video Trading Course

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