According to some brokers, 93% of all new traders wipe out their accounts in their first few weeks of trading.

Why is this though?

There can be a number of reasons but a common one is a much too high risk/reward ratio.

Firstly, on a trade level, new traders will often set their stop loss and take profit at similar levels. For example, the stop loss and take profit levels are both 50 pips away from the entry point. This means that the risk is quite large. Risking a lot can reap bigger rewards but it only takes a few trades going the wrong way to create huge draw downs on an account.

The second reason is that often traders will risk a substantial amount of their balance by taking many trades at a time. It’s not necessarily a bad thing to take lots of trades at once, but only if the overall risk is still manageable. If all the trades loose it’s easy to get rid of an entire balance in just a few trading sessions.

Jarratt’s risk management video takes you through how he manages risk. He explains how best to calculate your stop losses and how best to manage your trades to keep your overall losses at an absolute minimum. These lessons are re-inforced every day in the chat room and the trade examples.

So if you have wiped out your balance before, you might want to try out LiveConnect and the accompanying Coach’s Corner.