Almost every new trader lacks trading discipline; which is regarded as the backbone of successful trading journey. Risk management is one of the key part of trading. NEVER RISK more than 1% of your trading capital if you are a beginner. What does 1% risk means? Let’s understand it in detail.
Suppose you have a Trading Capital of $1,000. The 1% risk of $1,000 is $10. In order to calculate the risk you need to understand the concept of position size. Assume you are a GOLD #XAUUSD trader & you have made a bias of BUY. To calculate LOT (Position Size) we need to know open price, stop price, account balance & risk percentage.
Current Price: 1900
Take Profit: 1910
Stop Loss: 1896
LOT: 0.02 (See below how it is calculated)
I personally use CashbackForex position size calculator to manage the risk. So from above calculator on $1,000 account 1% risk with entry & SL the position size will be 0.02 lot. If price due to any reason don’t go in your favor and hits your stop loss. You will not loose more than $10.