There’s no way to escape the fact that trading carries risk. Whether you’re a very successful trader or an absolute beginner, no one is immune to this reality. So, if it’s risky, why is the Forex market the biggest trading market in the world with so many people trading successfully?
It’s all about Risk Management.
To better grasp the idea of risk management, it might help to think about trading from a different angle. Where it’s natural to put a lot of effort into focusing on what you’re trading and when to enter the market in order to gain a good return, risk management is about knowing when to exit and protect yourself from losses. Risk management is essentially your self-imposed safety net.
To have an effective risk management strategy requires emotional control. It involves accepting that some trades will go against you, which can be deceptively difficult – you’re effectively admitting that you’ve been wrong about a trade. But the sooner you acknowledge it, the more you can do to ensure any losses are limited.
It should be remembered that trading successfully is a long term game and having a sound risk management strategy in place will ensure you stay in the game longer. And, frankly, if you’re trading without a risk management strategy in place, you’re closer to gambling than you are to trading.
1. What is Risk Management?
A very good breakdown of the fundamentals of Forex risk management
2. Managing Trading Risk
This article covers the three steps required to understand and manage your trading risk
Five tips to help you manage your money better in the Forex market
4. Risk/Reward Management
Understand how concepts like Risk/Reward ratio, position sizing and risk amounts per trade will help with your risk management strategy.
5. Position Size
What is a Forex Pip? How much is a Forex Pip worth?
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