Risk management in forex trading lies in prudent use of leverage, lot sizes, stop loss and take profit tools. You have to risk no more than some certain % per trade from your equity, it is the main rule. The second is to maintain profit/loss ratio per trade that should exceed 1. It can be 2:1 or 1.5:1, i.e. you have to cut losses earlier (in terms of pips) than your profitable trades.
mmmm that true
Topic is discussed, but no real risk management advice…i.e. the topic isnt really covered in depth.
Can anyone possibly give a management strategy that works for them. With a bit more detail.
Risk management is really really important to have good and consistent returns in forex. I make sure I take proper steps to manage my risk.
- Setting a realistic stop loss level
- Trading on one currency pair
- Constantly learning about the market
- Being rational about the use of leverage
I read the forums on Forex on and off and cringe at some of the ideas of risk management, I will give two pieces of advice and two pieces of advice only and what they achieve and will not answer further questions.
The first regardless of your trading method always carry out a risk assessment of longer term trading on the pair, if the longer term trade is in the same direction as your trade then fine but if it is against your position adjust your risk accordingly (so if you are a day trader the longer term may be a week, if your trades last the whole week and you pull out at weekends then you may need to look at a months worth of analysis of the pair).
Secondly do not use stop losses you will get burned by spikes, the way to avoid this is to open a sub-account with your broker, put in your manageable amount, calculate your values before you get a margin call which will match your required stoploss position, using this method you will not get burned by a quick spike, two your losses are automatically managed and three you have not exposed your whole account to disaster
Be rational while trading. Your lot sizes, leverage, everything can put you in danger. So make all choices wisely.
For all Forex trader have to use best and flexible risk management strategies to minimize the finical loss. First of all only invest that money which you can afford to lose and only invest money you don’t need. Know how to control your losses and use correct lot sizes.
Yes of course risk management works because what you get is correct expectations about your possible trading losses and their probability. Thus you are prepared to them and know how to reduce them.
i don’t know, it’s worked today?
Agree with the use of stop loss, quite helpful while trading. An order type everybody should use to limit losses.
For me risk management is all about controlling risk per trade. It is important to consider trading capital and invest a smaller portion of trading capital per trade.
Risks must be taken as per a trader’s appetite otherwise you will just blow up your account. So do a good risk return analysis before investing/trading.
Money management involves managing your money in a safe and effective manner in order to grow your trading account effectively where as risk management is involved in ensuring you manage the unavoidable downsides to your capital whilst trading to make sure that you can survive the losses long enough to make the profits.
From all techniques I use stop loss orders in every trade and risk no more than 5% of my capital per deal when markets are not highly volatile. With this approach I think that I did a good job
Even i use stop loss orders a lot. They help restrict the losses. As far as risk is concerned, i keep altering it as per the current market scenarios and obviously my financial positions. Sometimes the risk percentage is 2% and sometimes 6% but never more than that. Managing risk is really crucial.
here you can learn a lot, many are experts
So what’s your question?
Yes right. Taking notes.