Study Guide for Come Into My Trading Room - Forex Factory

128 ANSWERS AND RATING SCALES
Answer 70
Choice 3 is correct. Give yourself four points for choosing the right answer.
The 2% Rule, the most important rule of money management, protects
you from ever losing more than 2% of your account equity on any single
trade. If your stop is close and risk per share is small, you may trade
a bigger size, as long as you are mindful of the overnight risk. If the stop
is far and risk per share is high, the size has to be smaller because your
total dollar risk may never exceed 2% of your account equity.
Answer 71
B. 1 and 2. Give yourself four points for choosing the right answer, or
two points if you answered C.
According to the 2% Rule, you may not risk more than 2% of your
account equity on any given trade, including commissions and slippage.
Having a $50,000 account allows you to risk no more than
$1,000 per trade. Trade 1: you risk $1.50 per share on 500 shares, for a
total of $750, which is acceptable. Trade 2: you risk $3 per share on 300
shares, for a total of $900, which is acceptable. Both trades leave room
for slippage and commissions. Trade 3: you risk $1 per share on 1,000
shares, for a total of $1,000, which leaves no room for slippage or commissions.
Trade 4: you risk $6 per share on 200 shares, for a total of
$1,200, which would break the 2% limit. Trade 5: you risk $2 per share
on 700 shares, for a total of $1,400, which would break the 2% limit.
Answer 72
A. 1, 3
B. 2, 4, 5
Give yourself a point for each correct answer.
The key rule of money management is never risk more than 2% of
your account on any given trade. The dividing line is drawn at 2%—if
you risk less, it is a businessman’s risk, and if you risk more, you are