One of the most common mistakes I see Forex traders make is increasing risk exposure because of a perceived winning or losing streak. Just by being successful on a few trades,more dollars will be risked per trade because more money is in the trading account. Because you have more money (and confidence) when successful, you are also likely totake larger percentage risks. Not surprisingly, this ruins more Forex traders than a series of small losses.
Not allowing the risk percentage to unreasonably increase as profits are realized and discipline in maintaining protective stop losses can overcome this mistake. What I mean by ‘unreasonably increase’ is this – on a typical trade, your risk should be in the range of 3% to10% of your account size depending on trade confidence. As you see yourself on a winning streak, you are tempted to increase risk percentages.Never increase your risk percentage to more than
10% of your account balance on any single trade.
I have also seen traders risk more after a losing streak and risk less after a winning streak. Their thinking is that after a string of winners, a loser has to come at any moment so it is time to reduce risk. The other side of this is increasing the size of their risk after a string of losses thinking that a winning trade is imminent. Do not fall into this ‘thinking’trap! Those percentages of 3% to10% for me because of my high level of confidence in trading my proven system. If you are new to trading, your risk should be between 1% and 3% for a typical trade and 8%
maximum loss on any one trade.
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