DEAR CINDY...

I couldn't reply your email since it was being rejected a few times. So I guess there is no harm of putting it here... your question was...

Hello,

How many micro lots can i use for 2 risk for 500 account?Would you consider giving me a hand or at least some advice based on your experience? Any info much appreciated.Thank you for your help.

Kind Regards,
Cindy

My answers -> it depends on your stop loss location and your risk appetite level. At times I even risk 20% of my account (ie 100 dollars for a 500 dollars account) since to me as long as you get it right and the setup is very very inviting, it doesn't matter. Yes it is risky but, even if you risk 2% (10 dollars - say open a 2 micro lots with 50 stop loss) but then you keep in getting into a losing trade 10 times in a row, you would have lost 20% as well, or perhaps even more.

So focus on quality rather than quantity. Nowadays (unlike last time) I just trade one or 2 times a day only. At times, I don't even trade.

My advice, with 500 dollar account, your aim is to generate 5% daily (ie 25 dollars) so that you can double (5% x 20 days = 100%) your account each month safely base on calculated risk. This is how I do it...

I would target 50 pips a day with scalping method. I can scalp either 5 pips x 10 trades or 10 pips x 5 trades, or sometimes 50 pips in a single trade... it depends on market as long as I get my daily 50 pips. So, for you to get 25 dollars with 50 pips, you can risk 5 micro lots (50 cents per pips or 5k lot) and scalp carefully with each trade's stop loss at 30 to 50 pips as well... trust me, it's not worth to put your stop loss bigger than 50 pips... its too agonising.. better take the loss and come back for the next trade.

Your aim is to get the position's right every time you enter so if you see and feel that the market is not on your side, just retreat and come back. You don't have to wait for your Stop Loss to be hit. But be careful do not act too soon... at times it is best to stick with your decision as price swing of 20 to 30 pips is normal especially if you play GBP/USD and GBP/JPY pairs.

To me, scalping is much better if you have the patience since getting 100 pips daily from 5 to 10 trades is much easier than aiming for a 100 pips gain in a single trade... well it's up to you actually. I have tried to swing with one failure to another so I decided to scalp the market rather than swing. Easier, faster and much more profitable to me... well, it's up to you... trading is quite personal actually... as long as you're comfortable with your style, just stick with it k...

So, if I were you... the max risk is 5 microlots with 50 stop loss and 10 TP (or bigger depends on market) in each trade. If you time your entry well, you shouldn't even get the double digit on the minus side... (ie -10 and above).

Remember, focus on accuracy and quality. Over trade is among the No 1 killer, apart from poor money management. Just apply the same 5% rule on the following month and you should be comfortable with your trades. Try not to be greed as we humans are difficult to control ourselves...

I hope this helps... By the way, I have 2 questions.

1. Are you new to forex trading?
2. What system are you using in identifying a trade setup?

All the best to you.

Best Regards