Basic Risk Management

In business it is common knowledge about the hierarchy of control in risk management.
In Spot Forex to be successful one should also apply such principles.
At the top of the hierarchy pyramid is elimination of risk. Often because of the nature of Spot Forex this is very easy and the best risk mitigation principle to apply.
Examples

  1. High impact economic data releases.
    Prior to the scheduled release don’t have any open positions on currency pairs that may be effected.
  2. Close trades prior to weekend due to risk of weekend gaps.

Next in order is substitution. If anyone can think of a way to substitute please share.

Third on list is engineering control.

  1. Use stop loss orders.
    2 Take profit orders.
  2. Trading robots.

Administrative control comes next.

  1. Have a trading plan written down and stick to it.
  2. Have money management system written down and stick to it.
  3. Have a trade diary and record your trades.

And finally we come to personal protective equipment. Once again I can’t think of anything here but if anyone can please share.

Also please add to my list if you can think of anything else.

Wishing everyone happy, safe and prosperous trading.

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what is going on?

I think you have said a lot of very important points to risk management. Almost everything you have written here is exactly what I do.

Great post.

Cheers

Blackduck

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thanks for that, well needed reminder <3

hope you all have a good trading week those that are trading

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what you think mate , there is any different between money and risk management ? its all about same of any difference between two. ?

My thoughts are that money management is just one part of your entire risk management plan.

Risk management is the most important topic in any business. Because the basis of any business is financial investment and we must do everything possible to save our money and create the conditions for it to become even more.

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risk management is really important for any kind of works , despite of having lots of money and plan , all approach can be useless if there is no RM.

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You summed it up really well.

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Money management is a part of trading. If you do not manage money, you will face a lot of losses. Money management is a part of the trading discipline. Successful traders follow money management all the time. Money management often converts bad trades into good trades. If you want to trade, you can earn a lot of money in one day, but if you do not follow the money management, this money can be spent in one day. So it is necessary to follow money management at all times in trading.

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Hi! I do agree with you. All points are valid. I also try to stick to the same, that helps a lot.

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That’s a very comprehensive outline of all to do with risk management. Thanks, it is very informative.

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Risk management is really important for trading. If you can’t control risk in trading, you will never be successful in trading. I made a lot of losses without risk control when I was in the new trade. But you can’t imagine that my trading results have changed since I started risk control. You will always manage 1: 2 risk rewards. And after analysis, use stop loss and profit level. Do not take more than a 2% risk on your original balance. And always manage the trade. This means that when you gain some pips, you will bring a stop loss to the entry-level.

It sounds like an add for me

Indeed managing your money and risk both are important for trading. No kind of compromise can be done on these two aspects if one wants to be a profitable trader.

Very informative post. Sound and practical advice. Thanks.

Risk management is a very important aspect of trading and these pointers are really helpful for that.

I understand the concept of S/L and T/P but I am not sure how exactly to do this in a live trade. Does this only work for intraday and swing trading? Is it possible to set up a stop loss and take profit for a quick scalp?

Hi @ogm271

You can trade with SL and TP on any trade. You can not put SL or TP to near your current price a you have the spread.

See SL and TP price like you tell the broker when the price reaches this level close my trade.

Some brokers have SL hunting so you have to “learn” how your broker act.

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