#557: Why you should never risk ‘x’ number of pips per trade

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Why you should never risk ‘x’ number of pips per trade

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#557: Why you should never risk ‘x’ number of pips per trade

In this video:
00:30 – Every trade you take should have the same percentage risk.
01:49 – Use my lot size calculator.
03:20 – Your losses are equal on every trade.
04:17 – Compounding on your gains.
05:10 – A 90% winning trader who loses money.
06:05 – View my Masterclass.
06:24 – Book a call to chat with us.
06:32 – Blueberry Markets as a Forex Broker.

Today, I’m going to explain why every trade that you take should have an equal percentage risk of your account. It’s really important you get this right and it will massively help improve your trading performance. So let’s get into that a more right now.

Hey traders! Andrew Mitchem here at The Forex Trading Coach. with video on podcast number 557.

Every trade you take should have the same percentage risk.

So today I’m going to explain to you why every single trade that you take, regardless of the currency pair or the direction or even the market or what time frame you take the trade on and what the size of stop losses. It doesn’t matter.

Every single trade that you take should have the same risk. It’s really important to do that and not many people understand why. So let me explain more.

You see, when it comes to risk, a lot of people think that they should risk x number of pips per trade. Downside of course, to that is a pip is meaningless. It doesn’t mean anything at all.

It depends on what time frame trade you’re on. you know, you could have a, you know, huge stop loss in terms of pips on a weekly chart and very small on a five minute chart, for example. And the danger that is people go, I can’t trade a weekly chart because I need to take too much risk. The other type of trader out there will say, I’m going to put one standard loss on, or 0.5 or 0 point 1 or 0.01, whatever it is, depending on the size of your account.

And you do that on every single trade. But of course, if you understand trading, you realize that each currency pair, if we’re talking forex, pays a different amount per pip of movement depending on what, the pair is and what your own account denomination is. As well. So there’s flaws to both sides of those.

Use my lot size calculator.

If you use my lot size calculator and I’m going to put a link to it if you don’t already have it, it’s available free of charge. It’s on MT4 or MT5 is a trading script. All you do is you download that, put that on to your trading platform. Simple to use. You literally can do it in like 10 seconds. Drag the script on to the chart you are wanting to trade. The script will know what that currency pair is or what that market is. It also knows the balance of your trading account, and it also knows what your account denomination is in what currency it’s in.

It could be New Zealand dollars or US dollars, a euro, yen, whatever it is that you are trading on your account. So it’s a very clever, simple script. You literally drag it onto the chart. You enter the size of the Stoploss and Pepsi, delete it. Just quickly calculate that it’s real easy to do of each trade that you take, and the risk that you’re taking, it’s defaulted to half a 1% risk.

That’s what I suggest you do. But you can change that around a quarter percent, 2%, whatever it is you want. But you literally drag the script on. You enter the stop loss of the of the trade. You say it’s like 55 pips, you’ve got a 0.5% risk. Press okay. And it will tell you the lot size needed on that particular trade.

So if you’re trading that currency, pair with a 55 pip stop loss on your account and the trade goes against you, you will lose in this case half of 1% of your account.

Your losses are equal on every trade.

What that does is it makes all your trading losses even an equal. So you could have a loss on a again, let’s use a simple terms, a five minute chart and a one week chart.

Let’s say a weekly chart. Five minute chart. And let’s say one of them loses and one of them hits the profit target. Whichever one loses, it doesn’t matter because the risk that you are taking on each of those two trades is identical. So at the five minute chart trade loses, you lose half 1% of your account. If the weekly chart loses, you lose half of 1% of your account.

And so it does not matter, which trades lose or which direction or which currency pairs you’re trading. And that’s the beauty of it helps keep your losses low consistent. Pre-known before you take the trade regardless of the size of the stop loss. The direction the pair any of that does not matter.

Compounding on your gains.

The beauty of this though when you think about it, if you were a successful trader and you start making profitable trades and you’re risking X percent of your account as your account grows, the actual monetary value that you are risking on each trade increases.

And so it keeps track with the size of your account as it moves up. Let’s say you have some losses also, it means that the monetary size that you are risking as your account has going down, you’re having a few losses get smaller and smaller still the same percentage. So in theory, you should never, ever, ever come close like remotely close to blowing your account.

But if you’re a good trader, you’re compounding on your gains. Really important mathematical equation to get into your, into your mind and to understand that concept because unfortunately, not many people do. And I see that all the time.

A 90% winning trader who loses money.

Here’s a common thing I see someone will come to me and go, Andrew, I’m doing really well. let’s say, example of a 90% winning trader, as in you’re winning nine out of ten trades.

And they say, I’m still losing money. And the danger is that they have lots of little small gains and they’re trading pips or lots. It doesn’t matter how you call lots or pips. And they’re having like let’s say nine small gains, one big loss smashes had all those gains and more. All you are doing by doing that is you’re feeding your broker by paying more spreads.

If you trade shorter time frame charts, you’re just doing the same thing. You’re feeding your broker, you’re spending more time trading, you’re more likely losing, and you’re going backwards and you’ll give up. So understanding how to calculate risk properly so every trade is equal and low and known risk is crucial to your trading success.

View my Masterclass.

If you’d like to find out more and how we do that, have a look at my 17 minute masterclass. It’s an on demand session. Just, enter details and you can go straight in and watch that when it’s convenient for you. So this block out like 20 minutes of your day and turn off everything. Just sit and watch that and you’ll learn a lot from it. Tips like I’ve just given you here.

Book a call to chat with us.

If you’d like to have a chat with us, book a call. you can book out a 30-45 minute call with us. I’ll put a link of how you can do that as well.

Blueberry Markets as a Forex Broker.

And if you’re out there looking for top quality forex broker, I can highly recommend Blueberry Markets. They do offer the MT4 and the MT5 platform. A great, company, a great bunch of people, to work with really, good a ray of markets, to trade, tight spreads and very, very quick, fund withdrawals as well. So I’ll put a link to them as well.

Don’t forget, if you haven’t got my lot size calculator, it works for MT4/MT5 download the right one because they are different for each platform. Get the right one, put it onto your platform and take it and make use of it on every single trade. It will massively help you.

I hope it helps. So this is Andrew Mitchem here. The owner of The Forex Trading Coach where we help people to become successful forex traders. We’ve been doing this for more than 15 years. Clients in 107 countries. We know what we’re doing. We now works. Come and join us if you’d like to. Bye for now.

Episode Title: #557: Why you should never risk ‘x’ number of pips per trade

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Find out more about Blueberry Markets – Click Here

Find out more about my Online Video Forex Course

Book a Call with Andrew or one of his team now

Click Here to Watch Prop Firm Masterclass

Click Here to Download my Lot Size Calculator