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

What is the state of your personal finances?

You must first assess whether or not you can afford to trade.

Forex trading should only be done with capital at risk.

Risk capital is money that, if lost fully, would not have a significant financial impact on you.

Risk capital refers to money that can be lost.

This is the type of money that, if lost, would not result in the loss of your home, car, spouse, limbs, electricity, and so on.

Don’t put your money at risk if you can’t afford to lose it!

If you’re gambling with money that you need to pay your expenses, it will severely impair your ability to make objective trading decisions.

Consider how concerned you’ll be when the trade is open, knowing that if you get stopped out, you might not be able to put food on the table.

“There goes tomorrow’s lunch!” you’ll think every time a pip goes against you.

You don’t want to end yourself hungry, homeless, and bankrupt, do you?

Unless, of course, you do.

In that case, go ahead and risk all your hard-earned money in forex.

How Much Time can Your Dedicate to Forex Trading?

You should think about how much trading will effect your current lifestyle.

How much time can you devote each day/week/month (whatever is acceptable) to the various requirements of forex trading and administering a trading system?

Your trading style should be determined by your time available.

The shorter the timeframe, the more time you need to spend in front of the charts.

Because you enter and exit deals throughout the day as a day trader, you must be riveted to the screen at all times.

The longer the timeframe over which you trade, the less you need to monitor the market. You can simply check your trade every now and again.

Distractions must not be overlooked!

Do you mean 8 hours of your entire concentration staring at charts and reading economic data releases when you say you can trade currencies for 8 hours a day?

OR does that imply 8 hours of staring at charts, analyzing economic data releases while cooking breakfast for your Honeybun, juggling knives, playing with your kids, watching BTS on YouTube, following Taylor Swift on Twitter, stalking someone on Facebook, and saving the world from evil forces?

Because if you were a scalper, you’d most likely miss a lot of entrances and exits and wind up scalping your own skull as a result of your numerous losses or lost winning possibilities.

You must also devote time to building and fine-tuning your trading system.

Trading your system will necessitate staring at charts for prospective entrances. Once you’ve entered a trade, you must handle it.

You need time after you depart to examine your transaction and seek for ways to enhance it.

Then you’ll need to set out time to record what you feel and do in your trading notebook. The amount of time required to do all of this will be determined by your trading method.

Naturally, any forex trading method must take into account how much time you have available. All of this assumes you only have ONE trading system.

You should go through this step for any trading system you want to use. Whatever “operating hours” you choose, make sure you can commit to them consistently.