- Forex trading is considered synonymous to gamble where a trader is never certain whether he will win or lose the trading game. However, with a little care for risk, he can avoid the main threats that are posed to his business. Keeping the same issue in mind, Fuad Ahmed compiled a list of tips to manage risks in forex trading for his readers, in the form of an infographic.
Risk management in forex is a multi-level process, where a trader takes several steps to ensure he is following the right strategy in order to minimize the risk factors in trading.
The first and foremost step that Fuad Ahmed suggests traders take is the measurement of risk before entering a specific trade, followed by a piece of advice that the trader does not enter the deal if unsure after assessing the risks of the trade and if doubtful.
A next very important step that a trader should take is the scheduling of a trading plan so he doesn’t digress and has a robust strategy preplanned to go by. Next comes the market trends, that play a vital role in telling a trader regarding the recurrent patterns of the market. If a trader is aware of how the market moves or prices fluctuate, he can estimate the flow of trade and place the best deal.
A trader before the start of a trade, should place a stop loss and not risk more than just 1-2% of the account value, which means that if he is trading 10,000, he should not risk more than 100-200 in one trade. As he matures the trading game, he can increase the amount to 5%, but to avoid losing much money, he shouldn’t put too much at stake and also not trade a big lot.
A common factor which leads to the devastation of many traders is the leverage. Traders often take a high leverage from the brokers and end up losing a big amount, this results in them becoming indebted to the broker and eventually losing the money which they had made.
Another suggestion from Fuad Ahmed for the traders is to avoid trading the same currency multiple times. Where all this is said and done, one of the most significant tips to manage risks in trading is definitely related to psychology. A trader above everything is advised to remain composed and stress-free, it’s believed that if a trader has conquered his fears, he can have a long way to go.
If all these tips are aptly followed, there is no doubt that the whole game of forex trading comes in the hands of the trader.
Infographic by- Fuad Ahmed Currency Trading Expert