Forex Day Trading Risk Management
Every successful forex day trader manages their risk; it is one of, if not the, most crucial elements of profitability.
Keep risk on each trade very small, 5% or less is typical. This means if you have a $3,000 account you shouldn't lose more than $150 on a single trade That may seem small, but losses occur, and even a good day trading strategy will see strings of losses. Risk is managed using a stop loss order.
Forex Day Trading Strategy
While a strategy has potentially many components and can be analyzed for profitability in various ways, a strategy is often ranked based on its win-rate and reward/risk ratio.
Win-rate is how many trades are won out a given number of trades. Say you win 55 out of 100 trades, your win rate is 55%. While it isn't required, having a win rate above 50% is ideal for most day traders. 55% is acceptable and attainable.
If a trader loses 10 pips on losing trades but makes 15 on winning trades, they are making more on winners than they are losing on losers. Even if they only win 50% of their trades, they will be profitable. Therefore, making more on winners is also a strategy component many f…