Greetings,
One of the best tips I can give anyone regarding Forex is to always protect their capital. You want to cut your losses short, and let your profitable trades run as long as possible.
The easiest way to do this is to always use an appropriate stop-loss.
A stop-loss determines at what price you will automatically exit the trade.
For example, if you want to only risk $5 on a certain trade, then you would set a stop-loss of 50 pips lower than the order price (trading .01 lots).
Of course, an appropriate stop-loss depends on what type of trade you are entering.
Scalping should always entail a very tight stop-loss, while swing trading enjoys a stop-loss with much more breathing room.
On average:
Scalping Stop-Loss: 8 - 15 pips.
Swing Trade Stop-Loss: 15 - 100+ pips.
These are just rough estimations!! There are no set rules - this is just to give you a reference!!
Lot Size and account size play a big part in this equation. A higher lot size means higher risk for profit/loss, so adjust your stop-loss accordingly.
Account size is also an important factor. A higher account has more leeway before triggering the dreaded "margin call". A margin call in Forex simply means that the trade has turned so far against you that your account is on the verge of depletion. Thus, the trade is automatically closed, starting with the most negative trade first!
It should be quickly noted that it's impossible to have a negative account balance in Forex. They always stop the trades before it reaches that point. If you deposit $100 into your account, you are only risking that $100.
The most talked about rule in Forex is the infamous "2% Rule".
It is widely believed and touted as an iron-clad rule that one should NEVER risk more than 2% of their account balance on ONE trade.
The rule is also extended to say that one should NEVER risk more than 6% of their account PER MONTH.
$100 account:
2% Daily Loss Acceptable = $2 Per Day -- Set your Stop-Loss for a 20 Pip Loss (.o1 Lots).
If you lose once, you are done for the day.
6% Monthly Loss Acceptable = $6 Per Month -- 3 Losing Trades @ 2% Loss.
The reasoning behind this is to stretch your account out so that you avoid blowing it up within your first day or week or month of trading.
Under this kind of system, you can trade for months on end, even if all you ever do is lose.
This concerns solely account longevity. In my opinion, these are good guidelines but I think it depends once again on the trading style. I defintely think you should place very specific account loss percentages for the day and month, but they do not have to rigorously follow these numbers.
If you are a bit of a daredevil, you could have a 4-8% Daily Loss quota with a 10-15% Monthly Loss quota. Understand that this has consequences, but it does grant you a bit more freedom to take more trades. It stinks to lose one trade and then have to avoid trading the rest of the day, even though you really want to take a trade later on (for whatever reason).
I would say good levels are 2-4% Daily and 6-10% Monthly.
Hope this was informative!
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