What Is Your Risk Capital? How Much Money Can You Afford To Lose?

Risk management is an important key factor to note as a trader. Risk management is the ability to contain your losses so you don‘t lose your entire capital. It’s a technique that applies to anything involving probabilities. You know yourself and you know better than anyone how much capital you can afford to lose. You need to determine if you can even afford to trade.

Forex trading should only be done with risk capital. Risk capital is that money, which when your lost in trade completely, would not have a great harmful impact on your trading capital.

Risk capital is money that you can afford to lose when trading. The kind of money that when Lost, wouldn't at the same time causes you to lose your car, home, spouse, limbs, electricity, and others. Never risk what you cant afford to lose!

When you‘re playing with money that you need to pay the bills, it will have a huge negative impact on your ability to make impartial trading decisions. Just picture how stressed you’ll be while your trade is open knowing you might not be able to put on the food on the table if you get stopped out. Each time a pip goes against you, you‘ll be thinking, oh “There goes tomorrow’s lunch!” will I make it!.. I believed you wouldnt like ending up being starved, homeless and broke right？

Unless if you choose that yourself by proceeding to trade and risk all your hard-earned money in forex. But that is not advisable Don‘t be stupid!. There fore If you can’t afford to make dough in the kitchen, then you cant afford to make dough in the forex market.

Use your brain.

Always start to trade forex in Demo mode, before using your real money, never start trading forex with real money until youve accumulated enough risk capital.

As we continue, well teach you all about risk management and how you should manage your risk capital in forex.