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Newbie here Question about Risk Management.


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Hey Guys,

Every book or course that I read talks about position sizing, that you should not bet more that 1% or 2% per trade. Now here comes my question lets say I'm planning to start out with a 1000$ account. 1% of that would be 10$ is this possible on the IG platform? If yes please show me how.

Thanks in advance for your time!

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14 hours ago, Lorinius said:

Hey Guys,

Every book or course that I read talks about position sizing, that you should not bet more that 1% or 2% per trade. Now here comes my question lets say I'm planning to start out with a 1000$ account. 1% of that would be 10$ is this possible on the IG platform? If yes please show me how.

Thanks in advance for your time!

Hi, good question. the answer is yes but no, new traders should use the absolute minimum trade size the broker will allow, with experience of not losing then think to step up to 1 or 2%. The risk on any trade is the amount of your stop loss, if  you are looking to trade on a higher time frame chart and the min trade size is £0.50 and your stop needs to be 20 points then fine but any bigger and then no. A 20 $/£ max stop loss really limits you to day trading which is not really for a novice, the H4 or daily chart is better but tends to need larger stops.

The first and hardest lesson in trading is to learn how not to lose money, after that everything else is relatively simple.

If you are learning then seriously consider using the IG MT4 platform where min trade size is just £0.10 (in UK) so then if you need a 50 point stop for higher time frame charts that's fine, mt4 doesn't have as many markets as the IG web based platform but you can learn to how trade on any market.

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Thank you all for your insightful replies. Just a little more about myself firstly. I started trading at the top of the Bitcoin bullmarket 2017/18 where needless to say with all the bull action in alt coins it gave me an unrealistic expectation of trading, 200 euros turned int 5k in a matter of weeks with little to no research on the assets. Then the bearmarket started, the profits started to trickle down, still trading like a pile of garbage now that I look back on those days. Then my biggest mistake..I took 5k$ on a loan to trade some more and needless to say all of that money went away in a short period of time. Still paying on that until 2022. Upon further research, every analyst and pro trader tells it the same, that the worst time to get into trading is during bullmarkets...lucky me!

This all really left a bad taste in my mouth but I'm determined to become a better trader, with 100$ I started trading my way up to about 500 now, starting to see progress, getting more composed about my emotions and am currently looking to develop a system. That brings me to you guys, in that, that I'm looking to trade much safer instruments like forex and stocks as Crypto is still in it's early stages and way too speculative, there is money to be made but I want to get a taste of the other global markets as well. 

With Forex, my plan is to trade 1 year on a demo account until I'm consistently profitable and then start out with a live account of the same size. 

@TrendFollower to address your questions, given the fact that I'm a begginer in FX, I was thinking to focus on EURUSD since it's the most liquid and has the most action, would this be suitable for a 1000$ account to start with?

@Caseynotes I'm looking into MT4 as we speak, to set it up on my demo account and take it from there. 

Thanks a bunch again guys, any other advice that you have for me, much appreciated!

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14 minutes ago, Lorinius said:

Thank you all for your insightful replies. Just a little more about myself firstly. I started trading at the top of the Bitcoin bullmarket 2017/18 where needless to say with all the bull action in alt coins it gave me an unrealistic expectation of trading, 200 euros turned int 5k in a matter of weeks with little to no research on the assets. Then the bearmarket started, the profits started to trickle down, still trading like a pile of garbage now that I look back on those days. Then my biggest mistake..I took 5k$ on a loan to trade some more and needless to say all of that money went away in a short period of time. Still paying on that until 2022. Upon further research, every analyst and pro trader tells it the same, that the worst time to get into trading is during bullmarkets...lucky me!

This all really left a bad taste in my mouth but I'm determined to become a better trader, with 100$ I started trading my way up to about 500 now, starting to see progress, getting more composed about my emotions and am currently looking to develop a system. That brings me to you guys, in that, that I'm looking to trade much safer instruments like forex and stocks as Crypto is still in it's early stages and way too speculative, there is money to be made but I want to get a taste of the other global markets as well. 

With Forex, my plan is to trade 1 year on a demo account until I'm consistently profitable and then start out with a live account of the same size. 

@TrendFollower to address your questions, given the fact that I'm a begginer in FX, I was thinking to focus on EURUSD since it's the most liquid and has the most action, would this be suitable for a 1000$ account to start with?

@Caseynotes I'm looking into MT4 as we speak, to set it up on my demo account and take it from there. 

Thanks a bunch again guys, any other advice that you have for me, much appreciated!

Interesting history, better luck I hope going forward. Couple of points, I wouldn't waste too much time on demo, you can't learn to trade on demo, it's ok for learning how the platform works and for trialing strategies but that's it really, it's like expecting to learn to drive with a car up on blocks, there is no risk and never will be. That's why I suggested the mt4 because you can start with pennies and work you way up.

Second is that though FX might have liquidity there is currently no volatility and the many of the majors have been basically going sideways for over a year, consider commodities or indices. I posted recently on a CME report regarding this but can't remember which thread but never mind, take Rolf's word for it, exotics though usually have a high spread which will work against you starting off.

 

image.png.d63e50294d21e912acd2469b59c5a9eb.png

 

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Aye, valid points, and I'm aware of the demo account not being the real deal, I just want to take it slow and steady, and the fact that there isn't much action in FX I think for me its also currently a good thing, not looking to get rich quick this right now, I want to develop a system and then I'll look into more volatile markets. That being said, I just installed MT4, any good tutorials that you can point me to? The interface looks pretty dated.

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Wherever you see the words 'where money is made' you should also add 'and where the most money is lost'.  There's a high correlation between certain pairs and I don't see any particular reason why you should 'expect' to make more money trading GPB/JPY than GPB/USD, a priori

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5 minutes ago, Lorinius said:

Aye, valid points, and I'm aware of the demo account not being the real deal, I just want to take it slow and steady, and the fact that there isn't much action in FX I think for me its also currently a good thing, not looking to get rich quick this right now, I want to develop a system and then I'll look into more volatile markets. That being said, I just installed MT4, any good tutorials that you can point me to? The interface looks pretty dated.

the problem is chop, chop just keeps cutting you up, you need price to swing. make sure you download the IG mt4 apps pack   https://www.ig.com/uk/trading-platforms/metatrader-4/mt4-indicators  

and see this page for vids on what each one does  https://www.thinkmarkets.com/uk/tools/mt4-super/mt4-super-apps/

Don't know any vids on mt4 off hand but a quick search on google should bring up loads.

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9 minutes ago, dmedin said:

Wherever you see the words 'where money is made' you should also add 'and where the most money is lost'.  There's a high correlation between certain pairs and I don't see any particular reason why you should 'expect' to make more money trading GPB/JPY than GPB/USD, a priori

GBP is one of the few that does have volatility, the problem is it's due to the Brexit uncertainty and nobody really knows what's going on, for the last 3 years. What normally happens is that due to a nation's change in circumstance a pair need to realign, this can take weeks of trend to achieve but of late those occasions are far fewer. 

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For what it's worth, I'll add my two bobs. Despite some of the earlier comments, Lorinius, I think starting out on a Demo account is a very wise idea. If you're not profiting on demo, then how are you gonna profit live?

Starting out with $1,000 probably won't get you very far with IG. There are commissions and stops that can stop you out and just wittle your account down, even though you may be trading reasonably well.

I started with a CFD account that gives leverage on the amount deposited. Even so, at least $3,000-$5,000 would need to be the starting point. Then you can make trades starting with a minimum of $200 each. If you make trades of less than $200, then you risk losing too much money on commissions.

Also, if your account is regarded as "high risk" (something IG evaluate when you open your A/c), then you may find your stops are very wide, which can also destroy your account value. If you can pass IG's short quiz that changes your account status to "low risk," then you can place closer stops, so you get out of losing trades early.

I follow a simple strategy using CFDs on stocks. The strategy does work. I can share this with you if you're interested? If you can meet the criteria I mentioned above, the strategy should work for you, too.

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