When trading any market, whether currencies, bonds or stocks, we know there is a chance that the contrarian indicator forex download will go up or down. Market risk means the price moves against us and we can lose money from the original stake. To manage this risk, what some do is make a rough guess to estimate the potential loss involved. USD and they have a stop loss at 1000 points.
They’d then take that as being a risk of USD 10, because that’s the theoretical maximum they can lose. Although it gives an absolute dollar value, it doesn’t answer certain questions that are necessary for proper risk management. It doesn’t say under what conditions that loss could occur. Depending on the market it could be a very low risk or a very high risk.
It could happen with high probability after 5 minutes or perhaps after three months. We don’t really have any idea. In other words, knowing the absolute loss from stop levels alone is of little use. This is because a trader can’t frame that against any time period or understand the level to which other positions might be affected.