Controlling Your Risks in the Forex

If you plan on becoming a Forex trader, then you should get comfortable with the concept of risk, but not become complacent that you start to disregard it. Risk is a constant factor in financial market since no strategy is perfect and no trader is successful 100% of the time.

The good news is, this can be easily managed on the Forex. Instead of going into a trade fearful of several things that could go wrong, you can dictate the amount of risk you are willing to face in order to make a profit. Since this is now made possible by a mix of modern trading tools and discipline on your part, anyone can do it, from beginners to advanced traders.

By taking note of the following tips, you can significantly reduce the number of surprises you’ll face in the Forex

Control Position Size

It is often a bad idea to put your account’s entire balance on the line in a single trade. Doing so means your risk is staggeringly high because it opens you up for the possibility of not being able to trade anymore should things go bad. Many traders cut out the risk of having their accounts wiped out by limiting each trade to only be worth below 10% of their total funds. This way, even if you end up losing, you will have a chance to recover by making more trades.


Think About Your Exit

Analysis is not only for knowing when to make a trade, but also to determine when and where you will close it. This means that, for each position you open, you should set a target profit amount where you will exit and cash in and an acceptable level where you will cut your losses if it comes to it. Resist the urge to keep trades open longer than you originally planned to limit the risk of losing what you have.

Put Down Stops

Related to the previous two tips, is to make full use of stop losses. Using these automatic operations, you no longer have to watch over your trades all of the time so that you can close it when things go wrong. By setting down different types of stop losses, you can protect yourself from losing more than the amount you are prepared to risk. Through trailing stops, they can even used to protect your profits.