Every trader has his own
tolerance for risk. If you have just picked up Forex in 2014 or are a reoccurring trader who is struggling in the market, smaller lots
are recommended. We recommend you start with micro lots or mini lots. When you
make profits several weeks in a row, and when you feel comfortable with bigger
risks, you can move to bigger lot sizes. As world renowned poet Maya Angelou once said that one is not born with courage. One
develops it by doing small courageous things—in the way that if one sets out to
pick up a 100-pound bag of rice, one would be advised to start with a
five-pound bag, then 10 pounds, then 20 pounds, and so forth, until one builds
up enough muscle to lift the 100-pound bag. In some ways courage is needed in trade risk. So it
might be awhile until you are ready to trade a standard lot.
Several factors affect how
much of your account size you should be willing to risk. We recommend you risk
no more than 2% of your account at first (1% would be better). Risk, in this
context does not mean the size of the trade you put on. Rather it is the
maximum loss you will tolerate before closing the trade. If you have a $5,000
account, we recommend you hold your losses to $100 per trade. That way, you can
lose 50 trades in a row before all your money is gone. You are unlikely to lose
more than 5-10 trades in a row, so this should keep you alive for a while. When
you have more experience, you can risk a bit more, but at first, keep the losses
small. Happy trading in 2014!
