Forex Traders Are More Risk Adverse
perfectly with the use of low leverage is the fact that profitable
forex traders are more risk adverse than the majority.
trading in the Forex market is inherently risky to begin with, but of
those traders who are successful, most of them have the
characteristics of being more risk adverse than average.
profitable Forex traders:  Use lower leverage (less than 10x),  Trade larger timeframes (which are inherently less risky than
day-trading), and  They typically trade the more high volume currency
pairs (like the EUR/USD).
profitable forex traders also follow the 2% rule, which is to never
risk more than 2% of their account value on a trade. Now, that's not to say that
their potential gain is only 2% as well – it just means they refuse
to risk more than 2%.
example, imagine that a trader intends to trade long-term for 2 to 10
days following a trend on the EUR/USD. If they have a $10,000 account
and they intend to have an initial stop-loss of -80 pips (to allow
for typical volatility), then they can only trade with a maximum of
250,000 units (which is $2.50 per pip) because the most they are
willing to lose is 2% of $10,000 or $200 ($200/80 = $2.50/pip).
since they intend on following a trend for 2 to 10 days, their
potential gain might be 240 pips, which would be $600. That's a 6%
gain from an initial risk of 2%.
this 240 pip trade might not seem that impressive due to the use of
low leverage, a -2% loss also won't blow up your account. Not to
mention that this same strategy with $100,000 would result in $6,000
gain from risking $2,000.
the 2% rule comes down to smart risk management and money management
decisions, which the majority of retail forex traders lack.
Forex Traders Are More Risk Adverse (Smart risk and money
Forex Traders Are Risk Seeking (Lack of, or poor, risk and money
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