Everything you need to know about Risk Management

June 5, 2014

Feature Series: Everything you need to know about… »

Risk Management

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.

Make sure you check out our Psychology and Forex trading section of the Vantage FX Education centre for more.

1. What is Risk Management?

A very good breakdown of the fundamentals of Forex risk management

What is Risk Management | Vantage FX Forex Education

 

2. Managing Trading Risk

This article covers the three steps required to understand and manage your trading risk

Step-by-step Risk Management | Vantage FX Forex Education

 

3. Money management tips

Five tips to help you manage your money better in the Forex market

Tips Forex Risk Management | Vantage FX Education

 

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.

Management Risk Reward | Vantage FX Forex Education

 

5. Position Size

What is a Forex Pip? How much is a Forex Pip worth?

Risk Calculator | Vantage FX Education

 
If you enjoyed this piece and are looking for more, please see other articles in our ‘Everything you need to know about…’ series.


Test your risk management strategy on a demo account!

Before you can start using our MT4 software you will need an MT4 trading account.
This can be a Demo or Live account – both are free to open with Vantage FX.

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