All business ventures expose you to the risk of losing money.
Trading and investing most certainly has risks. The concept of money for nothing (reward without risk) is a fantasy that will keep you chasing illusions. Risk is not something to be scared away by, but it does need to be identified, calculated and minimized. The most effective traders do not risk more than 1% of their total capital on any one trade.
Beware of so-called "systems" that boast remarkable returns but require you to risk 10, 20 or even 50 percent of your account value on a trade. These systems may work wonderfully in the short term but eventually, you will hit a losing streak that wipes out your whole account.
- Don't risk more than 1% of your account per trade.
- If 10-15 consecutive losses blow your account, you're doing it wrong.
- Be aware of currency correlations, and therefore correlation risk.
- Earn your way to higher degrees of leverage by your own track record of success.
- Don't trade money that isn't yours.
- Don't trade money that you can't afford to lose.
- Balance speculative trading with passive/defensive/unleveraged investments.
- Keep liquid. Build cash cushions to boost financial security and flexibility.
- Don't gamble. Stick to the plan. Keep it objective.