Jul 112013
 

 [simple_series title=”Forex Beginners”]

Proper risk management can return your profit rationally. So if you want to invest, you have to calculate the risk behind your investment. As an unpredictable and very risky market, you must learn about risk management in forex trading.

Reason to Risk Management:

For the following reasons you have to learn about risk management.

  • Risk reduction: Without reducing risk from your investment you won’t gain proper profit. So risk reduction is the main reason of learning risk management.

  • Loss control: Controlling on loss largely depends on risk management. If you want to set up total control over your investment and make a reasonable risk on loss, you have to gain excellent capability of risk management. That’s why you should know risk management.

  • Profitability index: Success depends on profit. If you want to grow the highest profit, you have to compare profitability index with risk margin to take better decision. And this is possible if you know the risk management totally. So you should learn risk management.

  • Calculating technical terms: Percentage of risk and pips are vital technical terms in forex trading. If you want to assume these perfectly you have to know about risk management. Risk management shows the variables of risk and assumption methods.

  • Stop loss: According to previously taken risk management terms, you can stop your loss in a margin. So that the amount of loss will confined to a level.

  • Risk ratio: Investment depends on risk ratio. If the risk ratio is much higher than your investing amount, you should deny it. Otherwise it could harm your total investment. If you want to calculate the risk ratio and apply it to your business, you must know risk management. So you should learn risk management.

  • Analysis of overall gain: Different analytical terms and components are to analyze to be success in forex trading. Risk terms are mostly important to catch the expectation. That’s why you need to learn risk management.

Ways to risk management:

You can follow various risk management methods. The most effective methods are as follows.

  • Stop Orders: This is the vital method of risk management. In this way you can stop your order in a certain situation. For example – your trade was EUR/USD @1.2579 for $20000. And you fixed if the price will go under 50 pips it will stop. As a result if the price will go 1.2519 it will automatically stop the trade.

  • Percentage: You can fix your loss percentage 2 or 6 as you want. 2% is more effective than any other. Assume your investment is $20000 and you don’t want to take risk under 2% or 20000 x 2/100 = $400.

  • Leverage: This is very effective when your capital is small. If you fix your leverage is 100:1 and your deposited amount is $1000 it can be gone up to million dollars. Here your loss merging is 1%. If your amounts face 1% loss, it will wipe out your total deposited amount.

Risk management is a crucial point in forex trading. So you have to learn this perfectly and apply this technically.

  One Response to “Why Should You Learn About Risk Management and Ways in Forex Trading? (12)”

  1.  

    When we can get up early in the morning and go to a job just for earning money, it is a non-sense question about why we need to learn this, it is obviously for earning money and it is not so difficult if we are determination and passionate about it. I love trading with keeping money and risk management in order because I feel safe and with OctaFX broker, they have stop out level just 15% so it gives me so much more space to stick to my plans.

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