The forex market is one of the largest in the world, we need to ensure when investing in this market that risk is minimised. Transactions are happening every day, markets are moving every second. Losses can be incurred as a result of exchange rates fluctuating.
Only some traders will meet their expectation of making profits in the forex market, it is extremely difficult. Only those with correct risk management will succeed in trading forex.
A Simple Mistake Many Traders Make When Trading Forex
The biggest thing to remember when investing money into the forex market is that you should never trade with money that you can’t afford to lose. This is extremely common with new traders; the markets can be unpredictable at times which will leave those risking too much very vulnerable.
Watch this video: The Importance of Risk Management around a Trade (10mins 54secs)
Understanding Risk Management in Forex
In order to improve your forex risk management, you should always have a tested trading plan which will be tested with realistic risk parameters. The time you spend creating a trading plan will not be wasted as this is your staple when it comes to trading. Without a direct plan, you will surely fail.
Always ensure you are using stop losses, trading in forex without a stop loss will not end well. This is your safety net, ensure it stays in place on all your trades.
Try to stay on the right side of the Trend, trading the trend will ensure that major losses are minimised as the market should generally be moving in the same direction for a particular period.
Ensure you are adapting your trading to new market conditions, the forex market is forever changing. Always be willing to learn new techniques to profit out of the market.
Risk Management in Day Trading or Scalping
Leverage and margin are big factors in trading. Throughout the day your margin can increase dramatically. If you have too many trades on, you will suffer. To ensure this doesn’t happen, make sure your position size for each trade is reasonable and low risk.
You can also help this by trading the major pairings which require less margin to trade, like EUR/USD for example.
From following the basic points above, you will have a good foundation of managing risk parameters in trading the forex market. Just remember larger losses will also make you fail, ensure you minimise losses as much as you can.
In short, the most important aspect for a healthy trading account is proper risk management. Without it, you could have perfect entries, but no risk/reward ratios in order to best capitalise on the opportunity, your trade may make a number of pips before turning around, and if you haven’t taken the proper steps to ensure proper risk management then your perfect trade could easily turn against you.
Risk management separates the good traders from the great, and each type of trade comes with its own set of rules and challenges that you need to master in order to ensure healthy risk management to keep your account healthy.
The Platinum Formula:
Perfect Fundamentals + Perfect Technical Analysis + Perfect Logic + Perfect Risk Management = Perfect Trade
The Platinum Way
At Platinum Trading Academy, United Kingdom, we teach all individuals from different walks of life to become a full-time trader or create a secondary revenue stream by trading part-time. We trade in an Institutional Way by letting the market come to us and being patient. Using Platinum’s Trading system you can take many Pips out of the market. We can ensure using this style of trading your trading will make a turnaround as you will become much more consistent.
If you want to trade like the professionals do, making consistently profitable returns from your trading, get in touch with us and we will demonstrate live exactly how we approach the markets.
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Hopefully, you have enjoyed today’s article. Thanks for reading! Have a fantastic day!
Live from the Platinum Trading Floor.