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

How are your personal finances?

You need to determine if you can even afford to trade.

Forex trading should only be done with risk capital.

Risk capital is money that, if lost completely, would not have an overly harmful impact on you financially.

Risk capital is money that you can lose.

This is the kind of money that if you lost, you wouldn’t lose your home, car, spouse, limbs, electricity, etc.

Don’t risk what you can’t afford to lose!

If you’re playing with money that you need to pay the bills, it will have a huge negative impact on your ability to make objective trading decisions.

Imagine 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.

Every time a pip goes against you, you’ll be thinking, “There goes tomorrow’s lunch!”

You don’t want to end up starving, homeless, and broke now, do you?

Unless you do.

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

Don’t be stupid!

If you can’t afford to make dough in the kitchen, then you can’t afford to make dough in the forex market.

Use your brain.

Don’t start trading forex with real money until you’ve accumulated enough risk capital. Until then…

Stick to demo trading!

Later on, we’ll teach you all about risk management and how you should manage your risk capital.

Reprinted from Babypips, the copyright all reserved by the original author.