Jul 112013
 

Risk is one of the main factors in forex trading. Because this is very risky money market. If you want success here, you have to overcome all risks. And you can reduce your risks by following some rules and taking some steps.

Pre-trading tasks:

  • Market analysis: You can analyze market condition. To do so you have to draw together much information of market’s previous statistics and present flow. In this way you will know the weaver and variance of market. It will help you to reduce risk.

  • Risk management: If you have clear idea about risk management, it will be easy to reduce your investment risk in forex trading. Risk management is consisted with theoretical and mathematical process. So it helps to reduce risk by showing mathematical statistics with theoretical analysis.

  • Experience gather: In forex trading experience does the main tasks. If you are a new investor in forex trading, you must gather experience. You can gather experience with the passage of time with forex. But the perfect way is discussion. You can discuss with some experienced and successful traders. They will show you the real way and share their practical experience. Here you can have idea of risk reduction.

Trading time tasks:

What you did before trading, it doesn’t matter. If you do any wrong in trading time, you have to pay for this. So trading time tasks are mainly important.

  • Risk assumption: You have to assume risk and explain it in mathematical way. Let’s see some rules –

  • Ratio analysis application: Imagine you invest $500 @ 1.5963 assuming highest price 1.5983 and lowest price 1.5943. Here probability is +/-20 pips. So ratio is 1:1.

Price Highest price   Lowest Price   Ratio
1.5963 1.5983 1.5943 1:1
1.5963 1.5993 1.5948 2:1
1.5963 1.5978 1.5933 1:2

 

In the second raw we can see profit could be twice than loss probability. So here profit ratio is positive. In the 3rd raw it is opposite to second raw. If you analyze ratio and follow the 3rd raw, your investment will reduce risk.

  • Stop trading: It is situational task. Imagine your trade is @ 1.5963 and you want to stop order if the price goes under 1.5943 or your trading limit is 20 pips. It will automatically stop your order if the price crosses your limit.

  • Much thinking: If you think much and take trade decision on the basis of chart and condition your risk will reduce.

  • Apply intelligence: At the every step you can apply your intelligence and sharp sixth sense. As a result you will be able to reduce your investing risk.

Actually every step is very important in forex trading. Because it will affect your capital. So take decision intelligently with analyzing statics and deep thinking. And reduce your trading risk. Hope you will be able and get success.

  One Response to “Ways to reduce risks in Forex Trading (11)”

  1.  

    I think the best way we can lower the risk is by maintaining a healthy money management level and that only happens if we control our greed, it is not easy to do so while I love trading long term as that helps in money management and also keeps my money management in check and also thanks to OctaFX broker for providing the swap free account, it makes things even better and I can trade without having to worry about paying any fees.

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