Why you should never risk ‘x’ number of pips per trade

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#557: Why you should never risk ‘x’ number of pips per trade

In this video:

00:30 – Every trade you take should have the same percentage risk.

01:49 – Use my lot size calculator.

03:20 – Your losses are equal on every trade.   

04:17 – Compounding on your gains.

05:10 – A 90% winning trader who loses money.

06:05 – View my Masterclass.

06:24 – Book a call to chat with us.

06:32 – Blueberry Markets as a Forex Broker.

Today, I'm going to explain why every trade that you take should have an equal percentage risk of your account. It's really important you get this right and it will massively help improve your trading performance. So let's get into that a more right now.

Hey traders! Andrew Mitchem here at The Forex Trading Coach. with video on podcast number 557.

Every trade you take should have the same percentage risk.

So today I'm going to explain to you why every single trade that you take, regardless of the currency pair or the direction or even the market or what time frame you take the trade on and what the size of stop losses. It doesn't matter.

Every single trade that you take should have the same risk. It's really important to do that and not many people understand why. So let me explain more.

You see, when it comes to risk, a lot of people think that they should risk x number of pips per trade. Downside of course, to that is a pip is meaningless. It doesn't mean anything at all.

It depends on what time frame trade you're on. you know, you could have a, you know, huge stop loss in terms of pips on a weekly chart and very small on a five minute chart, for example. And the danger that is people go, I can't trade a weekly chart because I need to take too much risk. The other type of trader out there will say, I'm going to put one standard loss on, or 0.5 or 0 point 1 or 0.01, whatever it is, depending on the size of your account.

And you do that on every single trade. But of course, if you understand trading, you realize that each currency pair, if we're talking forex, pays a different amount per pip of movement depending on what, the pair is and what your own account denomination is. As well. So there's flaws to both sides of those.

Use my lot size calculator.

If you use my lot size calculator and I'm going to put a link to it if you don't already have it, it's available free of charge. It's on MT4 or MT5 is a trading script. All you do is you download that, put that on to your trading platform. Simple to use. You literally can do it in like 10 seconds. Drag the script on to the chart you are wanting to trade. The script will know what that currency pair is or what that market is. It also knows the balance of your trading account, and it also knows what your account denomination is in what currency it's in.

It could be New Zealand dollars or US dollars, a euro, yen, whatever it is that you are trading on your account. So it's a very clever, simple script. You literally drag it onto the chart. You enter the size of the Stoploss and Pepsi, delete it. Just quickly calculate that it's real easy to do of each trade that you take, and the risk that you're taking, it's defaulted to half a 1% risk.

That's what I suggest you do. But you can change that around a quarter percent, 2%, whatever it is you want. But you literally drag the script on. You enter the stop loss of the of the trade. You say it's like 55 pips, you've got a 0.5% risk. Press okay. And it will tell you the lot size needed on that particular trade.

So if you're trading that currency, pair with a 55 pip stop loss on your account and the trade goes against you, you will lose in this case half of 1% of your account.