How To Survive In Forex Trading – The 1% Rule
The greatest barrier to making it as a trader is losing all your money.
The markets are a hostile environment and it will not hesitate to take your money whenever it gets the chance.
Many books and courses on trading do not emphasise risk management and why it is essential for your survival, and it is not surprising then, that so many aspiring traders fail, because they do not manage how much they lose and end up losing all their money.
Maximise Your Chance of Success – The 1% Rule:
You can maximise your chance of success my minimising your chance of failure. One simple rule is almost all you need to ensure that your chances of losing it all are vanishingly small
Only risk a maximum of 1% of your trading account on any one trade
It really is as simple as that.
Why the 1% Rule Works – Suppose you started with $10,000. If you followed the 1% rule and risked only 1% of your money on each trade, you would need 459 consecutive losers before you lost 99% of your account.
That’s 459 losers in a row before you’d be left with $100!
To make that a statistical certainly, you would need a system that had a winning trade only after 459 losers, or a win rate of 0.21%.
Now, even the most inept traders have a win rate that is higher than that and even the most clueless traders get lucky and have winners now and again.
So unless you are extremely unlucky, the chances of losing all your money with the 1% rule are extremely small, which is why so many traders swear by this rule. They protect their capital.
The Greatest Benefit of the 1% Rule – You may be thinking that betting 1% does not give you much scope for big profits, but if you’re starting out, or even if you have been trading for a while, the greatest benefit of the 1% rule is not profit, but survival.
The 1% rule grants you the opportunity that so many beginner traders deny themselves from the get-go. Time. Your trading experience and learning needs time to mature into true market understanding – the point at which all successful traders start making consistent profits.
Mark S Tan is an “armchair trader” and has been trading forex from home since 2006 and believes discipline, perseverance and good education were critical to his success.To find out more about how to succeed in this challenging yet rewarding career, go to
http://www.mytoponlinetips.com/forextrading
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