Risk management is one of the key factors any forex trader should take with careful consideration. In this episode of Truth About FX, Walter discusses an efficient way to set your lot sizes even if your account is not yet big enough to trade the weekly charts.

http://media.blubrry.com/truth_about_fx/content.blubrry.com/truth_about_fx/TAFX_-_EP6_Do_I_need_a_Broker.mp3

Download (Duration: 04:54/ 5.60 MB)

In This Episode:

00:49 – find a broker

01:32 – risking precisely

02:47 – setting the same risks

04:08 – mathematical sense

Tweetables:

Find a broker who will allow you to set your lot sizes [Click To Tweet].

How to trade the weekly charts with a smaller account [Click To Tweet].

Choose a precise amount of risk in every trade that you make for your system. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hey, Walter. Today’s question is: I cannot afford to trade the weekly charts. What should I do? And the underlying question is: my account is not big enough so I can’t afford big stop loss. What do you say to that?

Walter: I appreciate the question, Hugh. This is really a common one. I hear this one a lot as traders who trades daily in the weekly charts. I hear this a lot and my recommendation always is to find a broker, like Oanda, who will allow you to set your lot sizes. It’s not just because it allows you to trade a thousand dollar account with a five hundred and fifty pips stop loss and still risk one percent of your account.

Not just that. That’s obviously the thing that you get by trading for two cents a pip or whatever it is. The other thing is that, over the long haul… I can post this video under the show notes for today’s session. But, basically, what you want to remember is that — and it’s hard to see this — over the long haul, if you were risking precisely the amount at risk that you want, that might be; 1%, 2%, whatever it is for your system. If you risk precisely that amount rather than having to choose — for example, if you have an account where you can’t set your lot sizes — you have to choose: am I gonna risk 2.5% on this trade or am I gonna risk 1.7%. You know what I mean? You can’t risk exactly two.

Hugh: Yeah.

Walter: Well, what happens over the long haul when you’re able to precisely risk 2% — and you’ll see this on the video — you actually will multiply your account by many, many, many percent over the years because you were able to take those 2% risk trades rather than the 1.7%.

If you think about it, it make sense because some of those trades that you’re risking 1.7% — because you can’t go over 2% and risk 2.5 so you have to choose the lower amount — some of those can be winners and those winners aren’t going to be as big as they would have been if you’re riski...